In March, pending home sales experienced their first decline since November due to limited inventory and buyers' uncertainty over the financial sector, as reported by the National Association of Realtors. The pending sales index, which tracks contract signings rather than final sales, fell by 5.2% from February to March. Contract signings decreased in three US regions but experienced a slight uptick in the South.
Compared to the previous year, pending transactions dropped by 23.2%, with all four regions witnessing a decrease in pending home sales. The scarcity of housing inventory is primarily responsible for the decline in sales, with multiple offers on nearly one-third of all listings and 28% of homes selling above the listing price.
The National Association of Realtors updated their housing forecasts, anticipating increased sales, stabilized home prices, and improved mortgage rates throughout the rest of the year. They expect sales in the latter half of the year to outpace the first half, driven by ongoing job gains and more favorable mortgage rates. New home sales are already on par with pre-COVID activity in 2019 and are projected to rise in 2023, mainly due to the abundant inventory in this market segment.
The association predicts that the economy will continue to add jobs and mortgage rates will decline. They estimate that the 30-year fixed mortgage rate will gradually drop to 6% this year and to 5.6% in 2024. Housing starts are expected to decrease by 7.3% in 2023, to 1.44 million, before increasing by 6.9% in 2024, to 1.54 million.
Job gains and improved interest rates will bolster existing home sales in the coming months, although annual sales are predicted to fall by 9.3% in 2023, to 4.56 million. With mortgage rates projected to decrease further, sales are expected to surge by 15.4% in 2024, to 5.26 million. New home sales are anticipated to rise by 4.5% in 2023, to 670,000, and by 11.9% in 2024, to 750,000.
The national median existing home price is predicted to decline by 1.8% in 2023, to $379,600, but may rise again by 2.8% in 2024, to $390,000. The median price of a new construction home in 2023 is projected to decrease by 1.9%, to $449,100, before recovering by 4.2% in 2024, to $468,000. While the priciest region in the country—the West—is expected to see lower prices, more affordable regions like the Midwest are likely to witness a slight gain this year compared to last.
Q&A Section:
Q: What factors contributed to the decline in pending home sales in March?
A: Limited inventory and buyer uncertainty over the financial sector contributed to the decline in pending home sales in March.
Q: What is the expected trend for mortgage rates in the coming years?
A: The 30-year fixed mortgage rate is expected to gradually drop to 6% this year and to 5.6% in 2024.
Q: What is the projected change in the national median existing home price for 2023 and 2024?
Answer: The national median existing home price is projected to decline by 1.8% in 2023, to $379,600, and then rise by 2.8% in 2024, to $390,000.
