Pending home sales decreased in March for the first time in four months, due in part to the lack of inventory of homes for sale, the National Association of Realtors (NAR) said Thursday. All four U.S. regions saw year-over-year declines.
NAR’s Pending Home Sales Index (PHSI) — a forward-looking indicator of home sales based on contract signings — fell 5.2% to 78.9 in March, the lowest level since November 2022. Year over year, pending transactions dropped by 23.2%.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. An index of 100 is equal to the level of contract activity in 2001, NAR said.
"The lack of housing inventory is a major constraint to rising sales," said NAR Chief Economist Lawrence Yun. "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."
Updated Forecasts
NAR said it forecasts that the economy will continue to add jobs, but at a slower pace, and mortgage rates will drop — with the 30-year fixed rate progressively falling to 6% this year and to 5.6% in 2024.
It added that it projects housing starts to fall from last year by 7.3% in 2023, to 1.44 million, and then increase 6.9% 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 continued job gains and improving interest rates, NAR said it anticipates existing-home sales will steadily improve in the upcoming months, but will still come up short on an annual figure. Existing-home sales will drop from the prior year by 9.3% in 2023, to 4.56 million, before increasing by 15.4% in 2024, to 5.26 million, the organization predicted. It also projected that sales of newly constructed homes will increase from last year by 4.5% in 2023 to 670,000, due to more plentiful inventory in this segment of the market, and increase by another 11.9% in 2024, to 750,000.
Compared to last year, NAR forecasts that median existing-home prices will mostly stabilize, with the national median existing-home price decreasing by 1.8% in 2023 to $379,600, and then improving by 2.8% in 2024 to $390,000. The expensive West region of the U.S. will see lower prices, but the affordable Midwest region will likely squeak out a positive gain, NAR said. The median new home price, it added, will be lower by 1.9% in 2023 to $449,100, followed by an improvement of 4.2% in 2024 to $468,000.
By Region
The Northeast PHSI fell 8.1% from last month to 66.6, a dro[ of 24.3% from March 2022. The Midwest index dropped 10.7% to 75.7 in March, down 21.5% from one year ago.
The South PHSI improved 0.2% to 99.6 in March, falling 19.8% from the prior year. The West index decreased 8.0% in March to 59.4, reducing 32.2% from March 2022.
NAR is America's largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.
