The National Association of Realtors said that pending home sales in March rose by 1.5% from the previous month and declined 1.1% year over year, according to its Pending Home Sales report.
The report provides the real estate ecosystem—including agents, homebuyers and sellers—with data on the level of home sales under contract.
NAR noted that month-over-month pending home sales rose in the Northeast and South, and declined in the Midwest and West. Year-over-year pending home sales rose in the South, while declining in the Northeast, Midwest, and West.
“Contract signings rose in March despite higher mortgage rates, pointing to pent-up housing demand,” NAR Chief Economist Dr. Lawrence Yun said. “A greater supply of inventory will help translate that demand into more home sales.”
Yun said home construction should focus on affordability.
“Demand sensitivity to mortgage rates is greatest among first-time buyers, particularly younger buyers,” Yun said. “As a result, boosting supply and new-home construction should focus on smaller, more affordable homes.”
“A good number of markets in the South experienced price cuts over the past year but recorded the strongest job growth,” Yun added. “That combination should lead to stronger housing market activity in the South this year.”
Good Early Indicators
NAR noted that pending contracts are good early indicators of upcoming sales closings. The amount of time between pending contracts and completed sales is not identical for all home sales, NAR said.
Bankrate Principal Analyst Ted Rossman said the report was slightly better than expected.
“These results are a bit better than expected,” Rossman noted. “The South fared best, thanks largely to moderating home prices and solid job markets. A friendlier attitude toward home building is also leading to more sales in the Sun Belt.”
Rossman noted that two cities, in particular, have benefited from lower home prices.
“According to Redfin, among the 50 largest metro areas, Austin and Dallas have experienced the largest year-over-year drops in home prices. It’s not surprising, then, to see both in the NAR’s top 10 for year-over-year pending home sales increases,” Rossman said. “These markets were red-hot a few years ago, then they came back to Earth a bit, and now we’re seeing some pent-up demand released. Buyers have the upper hand in these, and many other, markets because of increased inventory and decreased prices.”
Rossman said that the war in Iran has impacted home sales.
“Beginning with the onset of the war in Iran in late February, mortgage rates increased for six straight weeks, according to Bankrate. The average 30-year fixed rate jumped from 6.09% to 6.46%, cutting into affordability for homebuyers, especially first-timers,” Rossman said. “Rates have fallen in two straight weeks, and if a lasting peace agreement can be reached, we should see that continue. If the average 30-year fixed rate can get back to 6% or lower, that would significantly boost affordability (as long as we don’t see a pop in prices). In fact, if you have strong credit and shop around aggressively, you can already get a rate in the upper 5’s. Six percent is an important psychological threshold for mortgage rates.”
Mike Miedler, President and CEO of CENTURY 21 Real Estate, said that the 1.5% month-over-month gain is important.
Supply is Tightening
“This signals supply is tightening again. According to our company’s Chief Economist, Mike Simonsen, there are roughly 963,000 homes on the market nationally, barely changed from recent weeks and only 2.7% above last year. In parts of the Midwest and Northeast, inventory is still 70% below 2019 levels. If you’ve been waiting for the market to flood with options, that might not happen,” Miedler said.
“I’m hearing from our agents across the Century 21 network that buyers who show up prepared are finding opportunity – and sellers who are more willing to work with them on price, closing costs, and rate buydowns than they have been in years. Additionally, mortgage payments on the median-priced home are nearly 6% lower than they were a year ago, a fact most buyers don’t realize,” Miedler said.
“But that window may not stay open. Oil prices are already pushing inflation and mortgage rates higher. If that pressure holds through spring, some of the momentum in today’s pending contracts could stall right when the market hits its busiest stretch,” he said.
What is Miedler’s advice to buyers?
“Don’t read the national headline and assume it applies to your street. Texas looks very different from Massachusetts right now. Dallas already has fewer single-family homes for sale than this time last year,” he said. “A buyer in Connecticut is in a completely different market than one in Houston or San Antonio. The national number tells you the weather. Your local agent tells you whether to bring an umbrella.”
