"Buyer demand is still intense, but it's as simple as 'one cannot buy what is not for sale'"
Pending home sale transactions decreased for the fourth month in a row in February, according to the National Association of Realtors.
NAR’s pending home sales index (PHSI), a forward-looking indicator of home sales based on contract signings, fell 4.1% to 104.9 last month. Compared to a year ago, sales were down by 5.4%.
“Pending transactions diminished in February mainly due to the low number of homes for sale,” said NAR chief economist Lawrence Yun. “Buyer demand is still intense, but it’s as simple as ‘one cannot buy what is not for sale. It is still an extremely competitive market, but fast-changing conditions regarding affordability are ahead,” he said.
“Consequently, home sellers cannot simply bump up prices in the upcoming months but need to assess the changing market conditions to attract buyers.”
According to Freddie Mac, the popular 30-year fixed mortgage rate jumped to 4.42% last week due to rising inflation and escalating geopolitical uncertainty. As a result of higher rates and sustained home price growth, mortgage payments are up by 28% year over year at the end of February.
“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 said.
Yun expects mortgage rates to hover between 4.5% and 5% for the rest of the year and forecasts a 7% drop in home sales compared to 2021.
“Home prices themselves are still on solid ground,” he said. “They may rise around 5% by year’s end, and we should see much softer gains in the second half of the year.”