Pending sales numbers continue to dip in April. This outcome surprised economists who predicted mellow results after the dip last month. According to real estate experts, this event indicates that the shortage is spreading. The lack of lumber and other equipment in an already hot market is good news for sellers. But, this setting might price out many buyers, despite cheap mortgage rates. NAR said that existing home sales declined from $6.01 million to $5.85 million on an annual basis. The consensus had predicted a slight increase to $6.02 million.
The lumber scarcity is already well-known. But home builders also deal with many other supply chain issues ranging from copper to PVC pipes. This situation indicates that the rise in housing prices last year will continue. A shortage of inventory is partly to blame for the drop. And as a result, builders deal with widespread and unprecedented supply chain interruptions. The millennial population continues to demand larger homes to add to the complication. As the millennial population grows, they also seek to accommodate their growing families.
January Pending Sales Data
Analysts predicted that high demand would persist and property prices would rise. In 2022, the housing shortage will likely continue, though it will ease after a heated year. Nonetheless, there are still many interested buyers and few properties on the market. Buyers are still eager to move to many regions of the country. But, the lack of available homes contributes to soaring home prices. As a result, it still becomes a seller's market, which favors those who want to sell immediately. In the first month of 2022, homebuying in the United States was slower than expected. Pending house sales, an indicator of the housing market's health, fell in January.
The Pending Home Sales Index of NAR counts the number of properties under contract for sale. Now, data from the index declined 5.7% in January from December and 9.5% from the same month a year ago. Contract signings were down in every region of the United States. Bloomberg's estimates were far below analysts' projections of a 0.2% increase in sales from a month ago. The predicted estimates also fell behind with a 1.8% loss from the same month a year ago. The total housing inventory was 860,000 units at the end of January, down 2.3% from December and 16.5% from a year ago. This outcome is a new low for all types of homes since the NAR began recording the data in 1999.
So far, this month is the lowest inventory count in modern history. This fact is considerable since NAR started inventory for single-family homes in 1982. Demand for housing surpassed an all-time low number of unsold homes in January 2022. According to Realtor.com data, January's inventory level was down 28.4% from the previous year. Seller involvement was also lagging. At the same time, increased competition in markets shows how eager home buyers are. This outcome also drives up property prices and shortens time on the market. Rising mortgage rates and home prices were probable factors in the dip this January. These factors are an addition to record-low inventories.
February Pending Sales Data
A measure of pending house sales in the United States declined in February. Limited inventory continued to constrain the real estate market. And now, the market is also facing rising borrowing costs. According to data, NAR's pending home sales index fell 4.1% from a month earlier. Pending deals also decreased in February, owing to a low quantity of residences for sale. Moreover, sales of previously owned homes also plummeted to a six-month low. It is still a competitive market, but shifting conditions with affordability are coming. With a limited number of properties for sale, asking prices will remain high.
Additionally, the average rate on a 30-year fixed mortgage is at a three-year high of 4.5%. This outcome will further make homes less affordable. Pending house sales data is a leading predictor of existing home sales. Houses go under contract for a month or two before selling makes this tool effective.
March Pending Sales Number
In March, housing activity dropped for the second month in a row. According to NAR, existing-home sales declined 2.7% in March from a month earlier to $5.77 million units. Home sales in the United States declined from February across the board. NAR also reduced February's existing-home sales from $6.02 million to $5.93 million. The number of sales fell 4.5% from the same month the previous year. The results were better than experts' projections of a 4.1% month-over-month fall to 5.78 million units. The findings were accurate, as pending home sales have been falling for months.
The housing market has been experiencing a chronic shortage of available properties. As a result, mortgage interest rates increased to levels not seen since March 2020, edging closer to 4%. While the 30-year fixed mortgage dipped this week, it is still 3.89%, down from 3.92% a week ago. Russia's invasion of Ukraine is dragging down Treasury yields, which are still high. Mortgage rates have also risen by more than a whole percentage point in the last six months.
Final Thoughts
The housing market in the United States may be cooling. Because, for the fourth month in a row, pending house sales are still dipping. Housing demand remains strong, even as mortgage rates are rising. At the same time, the number of home sellers continues to lag what the market has seen in previous years. This result implies that buyers will continue to face a shortage of homes for sale. Additionally, supply chain concerns continue to push the completion of homes by weeks. Small builders are often locked out because big builders bid up prices on things they need. And these costs pass to other buyers who are in no position to haggle due to the scarcity of supply.
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