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As mortgage rates climbed above 7% in April, would-be home buyers appear to have pressed pause, revisiting their house-shopping budgets. As a result, pending home sales dropped nearly 8% in April. However, housing experts predict a turnaround could be coming soon.
The National Association of REALTORS®’ Pending Home Sales Index—a forward-looking indicator of home sales based on contract signings—is down 7.4% compared to a year ago. All four major regions of the U.S. posted decreases in contract signings last month and compared to a year earlier; the largest declines were in the Midwest and West.
“The impact of escalating interest rates throughout April dampened home buying, even with more inventory in the market,” says NAR’s Chief Economist Lawrence Yun. “But the Federal Reserve’s anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply.” (The Federal Reserve’s next meeting is June 11-12 to vote on its key benchmark rate.)
The market is seeing some hopeful signs: For the first time in a month, the 30-year fixed-rate mortgage dipped below 7%, averaging 6.94% last week, Freddie Mac reported. Rates below 7% will help improve buyer affordability, Jessica Lautz, NAR’s deputy chief economist, said in response to last week’s rate decrease. “Greater supply, coupled with the recent downward trend in rates, is an encouraging sign for the housing market,” added Sam Khater, Freddie Mac’s chief economist.
Despite the recent drops in existing-home sales and contract signings, home prices are staying strong. Median existing-home sales prices climbed to $407,600 in April—the highest price on record for the month of April. Prices are also up nearly 6% compared to a year ago, NAR recently reported.
“Home prices are hitting record highs, but the pace of gains should decelerate with more supply,” Yun says. “However, the prospect of measurable home price declines appears minimal. The few markets experiencing price declines will be viewed as second-chance opportunities for buyers to enter the market if those regions continue to add jobs.”
