As per the National Association of Realtors (NAR), pending home sales were down by 10.6 percent in February over the previous month. Pending home sales are typically existing home purchase contracts that have been signed and agreed upon.
In a year-to-year comparison, existing home sales were 0.5 percent lower. Supply has been lower overall for more affordable housing and more abundant for higher-end homes, initiating dramatic price points in sales. The housing market in America has its lowest supply of available homes ever. As a result, sales are down.
Lawrence Yun, NAR chief economist, said: “The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market are swift. But contracts are not clicking due to record-low inventory.”
Houses prices over $250,000 have resulted in more sales, but houses priced over $500,000 but less than $1 million are also beginning to have inventory issues, Yun pointed out.
“Potential buyers may have to enlarge their geographic search areas, given the current tight market. If there were a larger pool of inventory to select from, ideally a five or a six-month supply, then more buyers would be able to purchase properties at an affordable price,” Yun said.
By February’s end, there were 1.03 million homes available for purchase. The figure marked a 29.5 percent decrease from February 2020, the largest fall in a year on record.
Rising mortgage rates don’t appear to be impacting demand in the housing market. Thirty-year fixed loan rates started 2021 under the 3 percent mark and now stand at 3.45 percent. Historically, that’s still relatively low.
On the other hand, housing prices are climbing. According to the CoreLogic Case-Shiller home pricing index, home prices are 11 percent higher than they were a year ago, resulting in bidding wars where supply is lower.
Regionally, pending sales varied. The Northeast saw a 9.2 percent drop month over month and a 3.9 percent decline year over year. Midwest sales dropped 9.5 percent during February and were 6.1 percent lower than last year at the same time. Pending home sales in the South saw a sharper fall of 13 percent for February but were 2.9 percent higher for the year. Western sales dropped 7.4 percent in February from the previous month but were 1.9 percent higher than last year.