US pending home sales unexpectedly fell by 5.2% month-over-month in March 2023, the first decline since November 2022 and missing market expectations of a 0.5% growth. Pending home sales declined in the Northeast (-8.1%), in the Midwest (-10.7%) and the West (-8%) but rose in the South (0.2%). For perspective year-on-year, pending home sales are down 23.2% year-on-year in March 2023, following a 21.1% fall in February, and marking a 22nd straight month of declines. In March however we saw a resurgence in mortgage rates and a banking crisis which could delay a much-awaited housing market turnaround.
National Association of Realtors® Pending Home Sales
March 2023 Highlights
- Pending Home Sales (M/M) Mar-5.2% (est 0.8%; prev 0.8%)
- Pending Home Sales NSA (Y/Y): -23.3% (est -20.7%; prev -21.1%)
“The lack of housing inventory is a major constraint to rising sales,” said NAR Chief Economist Lawrence Yun. “Multiple offers are still occurring on about a third of all listings, and 28% of homes are selling above list price. Limited housing supply is simply not meeting demand nationally.”
Pending Home Sales by Region
- Northeast PHSI fell 8.1% from last month to 66.6, a decline of 24.3% from March 2022.
- Midwest index fell 10.7% to 75.7 in March, down 21.5% from one year ago.
- South PHSI increased 0.2% to 99.6 in March, falling 19.8% from the prior year.
- West index decreased 8.0% in March to 59.4, reducing 32.2% from March 2022.
“Sales in the second half of the year should be notably better than the first half as job gains continue and more favorable mortgage rates are expected,” said Yun. “Sales of new homes are already matching 2019 pre-COVID activity and are expected to increase in 2023, largely due to plentiful inventory in this segment of the market.”
Compared to last year, NAR forecasts that median existing-home prices will mostly stabilize – with the national median existing-home price decreasing by 1.8% in 2023, to $379,600, and then improving by 2.8% in 2024, to $390,000. The expensive West region of the U.S. will see lower prices, but the affordable Midwest region will likely squeak out a positive gain. The median new home price will be lower by 1.9% in 2023, to $449,100, followed by an improvement of 4.2% in 2024, to $468,000.
NAR forecasts that the economy will continue adding jobs, albeit at a slower pace, and mortgage rates will drop – with the 30-year fixed mortgage rate progressively falling to 6.0% this year and to 5.6% in 2024. Housing starts will fall from last year by 7.3% in 2023, to 1.44 million, and then increase 6.9% in 2024, to 1.54 million.
About Pending Home Sales
*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.
The index is based on a sample that covers about 40% of multiple listing service data each month. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
Source: NAR
From The TradersCommunity News Desk