Pending home sales fell 4.1% in February compared with January and were down 5.4% compared with February 2021, according to the National Association of Realtors (NAR).
It was the fourth consecutive month that pending home sales decreased.
Regionally, and month-over-month, pending home sales increased 9.9% in the Northeast but fell 6.0% in the Midwest, 4.4% in the South and 5.4% in the West.
All four regions registered a decline in year-over-year contract activity.
“Pending transactions diminished in February mainly due to the low number of homes for sale,” says Lawrence Yun, chief economist for NAR, in a statement. “Buyer demand is still intense, but it’s as simple as ‘one cannot buy what is not for sale.’”
Along with climbing home prices, Yun added that now buyers must grapple with rising mortgage rates and noted that shoppers will likely want to lock in before rates increase further.
“It is still an extremely competitive market, but fast-changing conditions regarding affordability are ahead,” he says. “Consequently, home sellers cannot simply bump up prices in the upcoming months, but need to assess the changing market conditions to attract buyers.”
As of the end of February, higher mortgage rates and sustained price appreciation has led to a year-over-year increase of 28% in mortgage payments.
“The surge in home prices combined with rising mortgage rates can easily translate to another $200 to $300 in mortgage payments per month, which is a major strain for many families already on tight budgets,” Yun says.
Yun forecasts mortgage rates to be about 4.5% to 5% for the remainder of the year and expects about a 7% reduction in home sales in 2022 compared to 2021.
“Home prices themselves are still on solid ground,” he adds. “They may rise around 5 percent by year’s end and we should see much softer gains in the second half of the year.”
