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Pending Home Sales Descend 3.9% in April

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Washington (May 26, 2022) – The National Real Estate Agents Association® reported a decline in pending home sales in April as contract activity declined for the sixth straight month. Only the Midwest region reported an increase in signatures month-on-month, while the other three major regions reported a decrease. In each of the four regions, there was a year-on-year decrease in contract activity.

Pending Home Sales Index (PHSI), * www.nar.realtor/pending-home-salesA positive indicator of home sales based on contracts fell 3.9% in April to 99.3. Transactions decreased by 9.1% year-on-year. Index 100 corresponds to the level of contract activity in 2001.

Lawrence Yun, Chief Economist at NAR, said: “The latest contract signings have declined for the sixth straight month, the slowest pace in nearly a decade.”

As mortgage rates rise, Yun predicts that pre-owned home sales will decline 9% in 2022 and home prices will settle to 5% by the end of the year.

“Rising mortgage rates have increased home purchase costs by more than 25% from a year ago, but soaring home prices have increased that number by another 15%.”

In some cases, these higher rates can increase your mortgage payments by as much as $ 500 per month. Yun points out that such price increases are already a burden, but budgets to combat rapid inflation, such as soaring fuel and food, will be even more problematic for families.

“The majority of homeowners enjoy huge wealth gains and don’t feel financial stress on their homes as a result of being tied to historically low interest rates or because they don’t have a mortgage. “Hmm,” Yun explained. “But in this current market, potential homebuyers are being challenged, so by choosing a five-year floating rate mortgage or expanding the geographic search area to more affordable areas. We may try to mitigate the rise in cost of ownership. “

Yun says that more opportunities to work from home have allowed buyers to expand their home search.

According to Yun, there are scenarios in which the market will improve quickly for buyers as well.

“If mortgage rates are nearly stable at the current 5.3% level and employment continues to rise, home sales could stabilize in the coming months,” Yun said. “Home sales in 2022 are expected to decline by about 9%, and if mortgage rates rise to 6%, sales activity could decline by 15%.

“In the meantime, house prices don’t seem to be in danger of a meaningful fall,” he continued. “Housing shortages continue and well-listed homes are still selling quickly. Usually, contracts are signed within a month.”

Breakdown of home sales areas pending in April

Compared to the previous month, the northeastern PHSI decreased by 16.20% to 74.8 in April, a decrease of 14.3% from a year ago. In the Midwest, the index rose 6.6% last month to 100.7, down 2.8% from April 2021.

South pending home sales transactions fell 4.7% in April to the 119.0 index, down 10.3% from April 2021. The West index fell 4.3% in April to 85.9, down 10.5% year-on-year.

The National Association of Realtors® is America’s largest industry association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industry.

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* The Pending Home Sales Index is a key indicator of the housing sector based on the pending sales of existing homes. If the contract is signed but the transaction is not completed, the sale is listed as pending, but the sale is usually completed within a month or two of signing.

Pending contracts are a good early indicator of future end-of-sale. However, the time from a pending contract to a completed sale is not the same for all home sales. Fluctuations in the length of the process from pending contracts to closed sales can be caused by issues such as buyer difficulties in obtaining a mortgage loan, home inspection issues, or valuation issues. ..

This index is based on a sample that covers approximately 40% of multiple listing service data each month. In developing the model for the index, the level of monthly sales contract activity was demonstrated to be parallel to the level of closed pre-owned home sales for the next two months.

Index 100 corresponds to the average level of contract activity in 2001, the first year of the survey. Coincidentally, pre-owned home sales in 2001 ranged from 5 million to 5.5 million, which is considered normal for the current US population.

Note: May existing home sales will be reported on June 21st. The next pending home sales index is June 27th. All release times are 10am.

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