In the biggest decline in three months, U.S. pending home sales fell 2.4% year over year during the four weeks ending April 5, according to a new report from Redfin.
The online brokerage said that sales fell most in Providence, Rhode Island (-15.5%), Houston (-15.4%) and New York (-15.3%). Pending sales increased most in West Palm Beach, Florida (20.9%), San Francisco (16.7%), and San Jose, California (11.4%).
Redfin noted that homes are selling slowly. It said the The typical home that went under contract did so in 51 days nationwide, the longest span for this time of year since 2019.
Here’s why Redfin said homebuyers are backing off:
- Rising mortgage rates. The weekly average mortgage rate jumped to 6.46%, the highest level since September.
- Rising prices. Home-sale prices rose 2.2% annually, the biggest increase in a year. Together with increasing rates, that has pushed the median monthly mortgage payment to $2,750, up slightly (0.2%) from a year earlier.
- The Iran war. The Iran war and the turmoil it’s causing in the markets are the reason mortgage rates are rising. The war is also contributing to widespread economic uncertainty, sidelining many would-be homebuyers. The ceasefire that was announced on Tuesday sent oil prices down and rallied markets, and it could help bring mortgage rates back down into the low-6% range.
- Easter effect. House hunters took a break over Easter weekend, which fell during this 4-week period but not during last year’s comparable period.
Redfin said that on the selling side, new listings dropped 2.6% year over year, the biggest decline in a month, also due, in part, to the impact of Easter weekend. New listings dropped most in Tampa, Florida (-17.2%), Providence (-16.6%) and Miami (-13.5%). New listings increased in just five metro areas: San Jose (14.4%), Philadelphia (8%), Milwaukee (7.6%), Cincinnati (1.2%) and Baltimore (0.6%).
New listings are losing steam, but Redfin noted that it’s still a strong buyer’s market almost everywhere in the country.
“There are more homes on the market than there are buyers, so sellers need to make sure their house stands out,” said Jesse Landin, a Redfin Premier agent in San Antonio. “The most important day is picture day—that determines whether house hunters will actually walk through your home. Paint the walls, make small repairs, and, if you can afford it and your local agent agrees it’s worthwhile, make bigger repairs. Your agent should also hire the right media group for photography and video; pictures taken with a phone just don’t cut it anymore. And make sure you hire an agent with a clear, specific plan for your home, not just a generic approach. That’s what I do—I have a plan for each home. Buyers making large down payments and taking on high monthly payments want a home that’s as close to perfect as possible, because they have more choices in the market.”
In March, according to the National Association of Realtors (NAR) Pending Home Sales report, pending home sales in February rose 1.8% from the previous month and down an estimated 0.8% year.
NAR said that pending home sales decreased in the Northeast and increased in the Midwest, South, and West each month. NAR reported that pending home sales decreased in the Northeast and Midwest and increased in the South and West year-over-year.
“The slight gain in pending contracts appears to be driven by improved affordability conditions. However, those conditions could reverse if higher oil prices lead to an uptick in mortgage rates,” said Dr. Lawrence Yun, Chief Economist of NAR. “The Midwest—the most affordable region of the country—was the strongest performer in February. But the Northeast was held back by a combination of higher home prices and a shortage of supply.”
