Realtors can’t sell homes that aren’t listed for sale, and NAR’s chief economist cites a lack of inventory as the prime cause of March’s drop in signed contracts.
WASHINGTON – Pending home sales decreased in March for the first time in five months (November 2022), according to the National Association of Realtors® (NAR).
Of the four regions included in NAR’s nationwide study, three U.S. posted monthly losses, while one – the South, which includes Florida – increased. All four regions saw year-over-year transaction declines.
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – dropped by 5.2% to 78.9 in March. Year-over-year, pending transactions dropped 23.2%. An index of 100 equals to the level of contract activity in 2001.
“The lack of housing inventory is a major constraint to rising sales,” says NAR Chief Economist Lawrence Yun. “Multiple offers are still occurring on about a third of all listings, and 28% of homes are selling above list price. Limited housing supply is simply not meeting demand nationally.”
NAR’s economic forecast sees the nation continuing to add jobs, though at a slower pace, and mortgage rate declines. It predicts the 30-year fixed-rate mortgage will progressively decline to 6.0% this year and 5.6% in 2024.
Housing starts will fall from last year by 7.3% in 2023 to 1.44 million, and then increase 6.9% in 2024 to 1.54 million.
“Sales in the second half of the year should be notably better than the first half as job gains continue and more favorable mortgage rates are expected,” says Yun. “Sales of new homes are already matching 2019 pre-COVID activity and are expected to increase in 2023, largely due to plentiful inventory in this segment of the market.”
NAR anticipates that existing-home sales will steadily improve in the upcoming months but still come up short on an annual figure, dropping by 9.3% this year compared to 2022. They’ll then increase by 15.4% in 2024, to 5.26 million.
Newly constructed home sales will increase from last year by 4.5% in 2023 to 670,000 due to more plentiful inventory in this market segment and increase by another 11.9% in 2024 to 750,000.
Compared to last year, NAR forecasts that median existing-home prices will mostly stabilize. The national median existing-home price will decrease by 1.8% in 2023, to $379,600, and then improve 2.8% in 2024 to $390,000.
However, price changes will vary by location. The expensive West region of the U.S. will see lower prices, but the affordable Midwest region will likely squeak out a positive gain.
The median new home price will be lower by 1.9% in 2023, to $449,100, followed by an improvement of 4.2% in 2024, to $468,000.
Pending sales regional breakdown: The Northeast PHSI fell 8.1% from last month to 66.6, a decline of 24.3% from March 2022. The Midwest index dropped 10.7% to 75.7 in March, down 21.5% from one year ago.
The South PHSI improved 0.2% to 99.6 in March, falling 19.8% from the prior year. The West index decreased 8.0% in March to 59.4, reducing 32.2% from March 2022.
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