Lack of inventory put a damper on March pending home sales
The National Association of Realtors reported the first dip in pending sales since last November as inventory remains tight.
- Pending home sales fell by 5.2% in March and were down 23% year-over-year.
- While pending home sales were down in every region compared to last year, the South posted the strongest numbers.
- NAR expects the economy will strengthen and interest rates will fall later in the year, leading to an increase in home sales.
The U.S. real estate market appears to be stuck in a holding pattern, at least as far as pending sales are concerned.
This week, the National Association of Realtors released its latest numbers on pending home sales — existing properties that are under contract and awaiting closing — and announced that sales fell by 5.2% in March, the first drop since last November.
Year-over-year, pending transactions fell a whopping 23.3%, the report said. A major cause of the slowdown is low inventory, NAR Chief Economist Lawrence Yun said in the announcement.
"The lack of housing inventory is a major constraint to rising sales," he said. "Multiple offers are still occurring on about a third of all listings, and 28% of homes are selling above list price. Limited housing supply is simply not meeting demand nationally."
The South is showing the most strength
Similar to other national findings, the story can change when looking at individual regions. While pending home sales slid in the Northeast, Midwest and West regions, the South — a 16-state region stretching from Texas to Florida and up to Delaware — saw a slight uptick of 0.2% in March. On an annual basis, however, pending home sales were down by nearly 20% year-over-year.
The small monthly gain in pending home sales for the southern U.S. is more good news for the region. This week, the U.S. Census unveiled the latest data on new home sales, which identified the South as the strongest market for newly constructed homes. During the month of March, the South recorded 386,000 new homes sold, which accounted for over half of all new homes sold across the country.
Sales should improve in the coming months
NAR is more bullish on sales for the second half of 2023. The association expects to see an economic lift from more jobs being added, and predicts that mortgage rates will fall to 6% by the end of the year. A stronger economy helps prospective homebuyers with down payments and borrowing terms, and lower mortgage rates could boost inventory as homeowners who locked in record-low rates may finally be willing to part ways with their properties.
Although existing-home inventory has been sparse, new home sales have rebounded to pre-Covid levels "and are expected to increase in 2023, largely due to plentiful inventory in this segment of the market," Yun said.
NAR also predicts that median home prices will start to stabilize this year. Prices of existing homes are expected to dip slightly by 1.8% to settle at $379,600, while new home prices will fall by 1.9% to just under $450,000.