Pending home sales slide again
Pending home sales slipped for a fourth-straight month, the National Association of Realtors reported this morning.
The Pending Home Sales Index (PHSI) for February decreased 4.15 to 104.9. Year-over-year transactions are down 5.4%.
The index is a forward-looking indicator based on contract signings with an index of 100 equal to the level of contract activity in 2001.
“Pending transactions diminished in February mainly due to the low number of homes for sale,” said Lawrence Yun, NAR’s chief economist. “Buyer demand is still intense, but it’s as simple as ‘one cannot buy what is not for sale.’”
Additionally, potential buyers continue to battle rising home prices along with climbing mortgage rates, Yun said.
“It is still an extremely competitive market, but fast-changing conditions regarding affordability are ahead,” he said. “Consequently, home sellers cannot simply bump up prices in the upcoming months, but need to assess the changing market conditions to attract buyers.”
As of February 2022, higher mortgage rates and sustained price appreciation have led to a year-over-year increase of 28% in mortgage payments.
“The surge in home prices combined with rising mortgage rates can easily translate to another $200 to $300 in mortgage payments per month, which is a major strain for many families already on tight budgets,” Yun noted.
The economist forecasts that mortgage rates will hover around 4.5% to 5% for the remainder of the year and expects about a 7% reduction in home sales in 2022 compared to 2021.
“Home prices themselves are still on solid ground,” he added. “They may rise around 5% by year’s end and we should see much softer gains in the second half of the year.”
Here’s how the PHSI performed by region:
- In the Northeast, the PHIS rose 1.9% to 85 on a month-over-month basis but fell 9.2% from a year ago.`
- In the Midwest, the index decreased 6% to 99.7 last month, down 5.2% from February 2021.
- Pending home sales transactions in the South declined 4.4% to an index of 127.2 in February, down 4.3% from February 2021.
- The index in the West slid 5.4% in February to 90.0, down 5.3% from a year prior.
Data in February showed that of the largest 40 metros, the most improved markets over the past year were Orlando-Kissimmee-Sanford, Fla.; Miami-Ft. Lauderdale, Fla.; Nashville-Davidson, Tenn.; Indianapolis, Ind.; and San Diego-Carlsbad, Calif.
More information about the February PHSI, from the NAR, is available here.
