The numbers: Contract signings on U.S. homes fell for the first time since last November, as buyers faced a tough market in March due to an undersupply of houses.
U.S. pending-home sales fell 5.2% in March, according to the monthly index released Thursday by the National Association of Realtors (NAR).
Sales dropped for the first time since November 2022. At the time, buyers had sharply pulled back as mortgage rates exceeded 7%.
Sales fell far further than what Wall Street expected in March. Economists polled by the Wall Street Journal were expecting pending home sales to rise 0.5%.
Pending home sales reflect transactions where the contract has been signed for an existing-home sale, but the sale has not yet closed. Economists view it as an indicator for the direction of existing-home sales in subsequent months.
Key details: Compared to a year earlier, transactions were down by 23.2%.
On a monthly basis, only the U.S. South saw an uptick in pending home sales of 0.2%.
The NAR said a third of all home listings were seeing multiple bids, and 28% were selling above list price. Realtors also expect the 30-year mortgage rate to drop to 6% this year, and 5.6% in 2024.
Big picture: Buyers, who are already sensitive to mortgage rates, are hurt even more by the underlying structural problem of low inventory. Some have turned to new homes, boosting sales for builders. But expensive homes and high mortgage rates will push home prices down for the year, Vanguard believes, by as much as 5% year-over-year.
What the realtors said: “The lack of housing inventory is a major constraint to rising sales,” NAR Chief Economist Lawrence Yun said. “Limited housing supply is simply not meeting demand nationally.”
Yun expects existing-home sales to drop on a year-over-year basis in 2023 by 9.3% to 4.56 million.
Then, he added, sales will rise recover, rising by 15.4% to 5.26 million.
Market reaction: U.S. stocks were up in early trading on Thursday. The yield on the 10-year Treasury note rose above 3.5%.