Potential homebuyers out shopping in April may have been spooked by a sharp rise in mortgage interest rates. Pending home sales, which measure signed contracts to buy existing homes, fell a wider-than-expected 1.3 percent compared to March, according to the National Association of Realtors. It was the third lowest level of the past year.
Pending sales were 2.1 percent lower compared to April of 2017 the fourth straight month showing an annual decline. The Realtors point, again, to the continuing supply crisis in housing today.
“Feedback from Realtors, as well as the underlying sales data, reveal that the demand for buying a home is very robust. Listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher,” said Lawrence Yun, chief economist for the NAR in a release. “The unfortunate reality for many home shoppers is that reaching the market will remain challenging if supply stays at these dire levels.”
Weakening affordability is going hand-in-hand with short supply, especially on the lower end of the market. As home prices continue to rise, potential buyers have less and less wiggle room in their wallets.
Mortgage rates jumped sharply in April, with the average rate on the popular 30-year fixed hitting its highest level in seven years. Buyers out shopping were having to recalculate their budgets for homes.
Buyers are also seeing higher prices for gas, which, while not a major factor for everyone, may weigh on consumer confidence. Buying a home is usually the largest investment most people ever make, and confidence is therefore key.
“The combination of paying extra at the pump, while also needing to save more for a down payment because of higher rates and home prices, may weigh on the psyche of those looking to buy,” said Yun.
Regionally, pending home sales in the Northeast were unchanged for the month and 2.1 percent lower than one year ago.
In the Midwest, sales decreased 3.2 percent monthly, and were 5.1 percent lower than April 2017.
Pending sales in the South declined 1.0 for April but were 2.7 percent higher than last April. Sales in the West dropped 0.4 percent monthly and were down 4.6 percent annually.