For the first time since November 2022, pending home sales fell in March, posting a 5.2% month-over-month decrease, according to data released Thursday by the National Association of Realtors(NAR).
The monthly drop resulted in the Pending Home Sales Index recording a reading of 78.9, down 23.3% year over year. An index of 100 is equal to the level of contract activity in 2001.
“The lack of housing inventory is a major constraint to rising sales,” Lawrence Yun, NAR’s chief economist, said in a statement. “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.”
Looking ahead to the second half of 2023 and beyond, NAR said it expects that the economy will continue adding jobs, but at a slower pace. In addition, NAR forecasts that mortgage rates will drop to 6.0% in 2023 and 5.6% in 2024, and housing starts will fall 7.3% year over year in 2023 to 1.44 million before rising 6.9% annual in 2024 to 1.54 million.
“Sales in the second half of the year should be notably better than the first half as job gains continue and more favorable mortgage rates are expected,” Yun said. “Sales of new homes are already matching 2019 pre-COVID activity and are expected to increase in 2023, largely due to plentiful inventory in this segment of the market.”
With NAR anticipating continued job gains and improving interest rates, the trade organization also expects existing home sales to steadily improve in the coming months, but still drop 9.3% year over year to 4.56 million for all of 2023. The NAR anticipates a 15.4% annual increase in 2024, bringing existing home sales back up to 5.26 million.
In the new construction sector, NAR predicts sales to increase 4.5% year over year in 2023 to 670,000 homes due to higher new home inventory than existing home inventory.
The trade organization also forecasts the median existing-home sales price to stabilize, with the national median dropping 1.8% in 2023 to $379,000, before rising 2.8% to $390,000 in 2024.
Regionally, the Northeast (66.6), Midwest (75.7) and West (59.4) all recored pending home sales drops in March, with the Midwest recording the largest drop at 10.7%. The South (99.6) was the only region to post a monthly increase, rising 0.2% in March. Despite this slight increase, the South also posted the largest annual decrease, falling 32.2% from a year prior.
