A “Sale Pending” sign appears in front of a home for sale on November 30, 2023 in San Anselmo, California.
Justin Sullivan | Getty Images News | Getty Images
According to the National Association of Realtors, the number of existing home sales contracts signed in April fell 7.7% from March to the lowest level since April 2020.
So-called pending sales are a predictor of sales that will be completed in the next one to two months. Pending sales are down 7.4% from April of last year.
Sales were expected to remain flat compared to March.
Because the figures are based on signed contracts, they provide a real-time picture of how buyers are reacting to mortgage rates. According to Mortgage News Daily, the average rate on a 30-year fixed mortgage was about 6.9% at the end of March, but has since risen sharply to 7.5% at the end of April.
With home prices still rising, supply is very low and competition is fierce, so the spike in interest rates has had a big impact on sales.
“Home buying slowed during April as interest rates rose, even as more homes were added to the market,” said NAR chief economist Lawrence Yun. “But the Federal Reserve’s planned rate cuts later this year should improve homebuyability, increase supply and improve housing conditions.”
While sales fell in every region of the country, the biggest declines were in the Midwest and West, the nation’s most affordable market and the most expensive.
“The likelihood of any visible home price declines is minimal. The few markets that are experiencing price declines could be viewed as a second chance for buyers to enter the market if employment continues to grow in those areas,” Yoon added.
A new report from Redfin found that, likely in response to the slowing pace of sales in April, the share of sellers who reduced their prices in May reached 6.4%, the highest level since 2022. Median asking prices also fell for the first time in six months.
According to Realtor.com, available inventory in April is 30% higher than April 2023, suggesting the summer market could be more active than last year.
“While inventory and prices are moving in buyers’ favor, lower mortgage rates will be key to luring both buyers and sellers back into the market,” said Hannah Jones, senior economic research analyst at Realtor.com.
