Pending sales inch up, but real growth unlikely until late 2026
The housing market may be stabilizing, but many economic factors are still in flux — and could tip home sales in a less rosy direction over the summer.
Homebuyers showed "cautious optimism" in April as pending home sales increased 1.4% from the previous month and grew 3.2% year-over-year, according to National Association of Realtors data released Tuesday.
Growth — despite uncertainty: In a sign that the housing market may be stabilizing, pending home sales increased on a monthly basis in all major geographic regions but the South and rose on an annual basis everywhere except the Northeast.
"Buyers are coming out with cautious optimism despite increasing economic uncertainty and a slight rise in mortgage rates," NAR Chief Economist Lawrence Yun said in a statement. "Demand will easily be even higher once mortgage rates retreat to the levels they were at earlier this year."
Regional movements: The Northeast saw the largest month-over-month gains, with pending home sales up 6.6%. Meanwhile, pending sales were up 3% in the Midwest, 0.4% in the West — and down 0.7% in the South.
On an annual basis, pending sales inched up the most in the South, rising 4.7%. The West saw an annual gain of 3.8% while the Midwest posted a 2.7% increase and the Northeast saw a 0.6% decline.
More inventory needed: Though home prices are generally higher compared to one year ago and fewer price discounts are being offered, interest in the market has grown, Yun said.
Over 1 in 3 (35.4%) homesellers slashed their asking price in April, down from 35.6% in March and below the record high of 36.6% recorded last August, according to new Redfin data.
But more inventory will be needed to avoid having home price growth outpace wage growth — or the homeownership rate could suffer, Yun cautioned. "All efforts need to be focused on boosting housing supply," he said.
Growth may be short-lived: April's hopeful growth in pending sales may not last amid persistently elevated mortgage rates and the high cost of homeownership.
"On a year-over-year basis, the improvement in rates compared to 2025 is shrinking," Bankrate Financial Analyst Stephen Kates, CFP, said in a statement. "Rates have only risen further in May, setting up a potentially disappointing May report."
Inflation fluctuations over the next few months will also impact rates — and how much consumers are willing to spend, according to Realtor.com Senior Economic Research Analyst Hannah Jones.
"Higher inflation generally puts upward pressure on mortgage rates, which have already started drifting back above 6.3% in early May," Jones said. "Beyond rates, inflation running ahead of wage growth means household budgets are being squeezed, a dynamic that could dampen buyer confidence heading into the traditionally active summer months."
Hope for the end of 2026: Nancy Vanden Houten, lead economist at Oxford Economics, said home sales will likely "move sideways for the next couple of quarters before beginning to gradually increase late in the year," adding that she expects the Federal Reserve to cut short-term interest rates around that time.
Despite consumers' continued economic uncertainty, housing market conditions are largely better for buyers than this time last year, with inventory slightly up, price growth cooling and incomes rising, First American Senior Economist Sam Williamson said.
"Those conditions could support firmer sales activity in the second half of 2026 if mortgage rates stabilize and broader economic uncertainty eases," Williamson said.