US pending home sales held steady in April, remaining unchanged after dropping in March, according to data released Thursday by the National Association of Realtors. After beating expectations in February, the pending home sales index dropped in March and was the first decline since November amid tight inventory and buyer uncertainty.
The pending sales index, a forward-looking indicator based on signed contracts to buy a home rather than the final sales that are accounted for in existing home sales, recorded no change from March to April, nationally, remaining at 78.9.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined by NAR. 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 US population.
Year over year, pending transactions fell by 20.3%. Pending home sales retreated in all four regions compared to one year ago.
“Not all buying interests are being completed due to limited inventory,” said Lawrence Yun, NAR’s chief economist. “Affordability challenges certainly remain and continue to hold back contract signings, but a sizeable increase in housing inventory will be critical to get more Americans moving.”
Month over month, contract signings rose in three US regions, but dropped slightly in the Northeast.
Pending home sales dropped 11.3% from last month in the Northeast, while the index rose 4.7% in the West, 3.6% in the Midwest, 0.1% in the South.
“Minor monthly variations in regional activity are typical,” said Yun. “However, cumulative results over many years clearly point towards a much greater number of home sales in the South.”
At 99.6, the Pending Home Sales Index in the South is only slightly lower than 100, which is equal to the average level in 2001, the first year NAR analyzed the PHSI.
“The South’s pending home sales activity is similar to that of 2001, but the Midwest’s activity has decreased by 22% in that same period, and the Northeast and West regions are both about 40% lower than they were in 2001,” Yun added.
The unchanged pending home sales highlighted the ongoing inventory challenges in the existing home market, said Danielle Hale, Realtor.com’s chief economist. Although, she said, contract signings remained above the fourth quarter’s low levels.
But this is an indication of slower home sales ahead, she said.
“Because contract signings are the first major step in a home sale transaction, today’s index signals that the market faces continued headwinds from low inventory and affordability,” said Hale.
Continued uncertainty around mortgage rates and resolution of the debt ceiling standoff may further tap the brakes for buyers this summer.
“So far, homebuyer interest has held up reasonably well despite expected economic slowing, as we near the end of the Fed’s tightening cycle and a new wildcard in the US debt ceiling negotiation,” said Hale. “With uncertainties looming, potential buyers have a lot to consider. My expectation is that an agreement is reached to end the US debt stalemate, and existing home sales will continue to muddle along while the new homes market continues to outperform.”