What the April pending home sales data shows
Pending home sales fell 7.7% in April as mortgage rates climbed above 7% once again. The Pending Home Sales Index fell to 72.3—7.4% lower than the previous year and the lowest level since April 2020.
New-home sales, which are also based on contract signings, fell 4.7% on a monthly basis and 7.7% on an annual basis in April, marking a slowdown in buyer activity amid elevated housing costs.
Existing-home sales slipped in April and inventory built up, as buyers faced ongoing affordability headwinds. Existing-home sale prices hit a new April peak, despite leveling listing prices in the month, suggesting that more higher-priced homes continue to sell.
Overall, active inventory climbed 30.4% in April and prices remained relatively steady, setting the stage for a slightly improved summer housing market relative to last year.
Though inventory and prices are moving in a more buyer-friendly direction, lower mortgage rates will be crucial in bringing both buyers and sellers back into the market.
The housing market continues to vary regionally, but all four regions saw both monthly and annual slumps in contract signings.
On a monthly basis, pending home sales fell 3.5% in the Northeast, 9.5% in the Midwest, 7.6% in the South, and 8.5% in the West. Compared with one year ago, contract signings decreased 3.1% in the Northeast, 8.7% in the Midwest, 8.2% in the South, and 7.3% in the West.
What this means for buyers, sellers, and the housing market
Pending home sales, or contract signings, measure the first formal step in the home sale transaction—the point when a buyer and seller have agreed on the price and terms.
Pending home sales tend to lead existing-home sales by roughly one to two months and are a good indicator of market conditions.
Mortgage rates hovered around 6.8% in March, allowing for an uptick in contract signings. However, mortgage rates climbed from 6.8% to 7.2% in April, dampening buyer enthusiasm.
Recent employment and inflation data has fallen in line with expectations of a slowing economy. Cooling inflation and employment data is good news for mortgage rates, .
Buyers holding off for lower rates might step into the market this summer, eager to take advantage of any improvements in affordability, as well as ample for-sale inventory in many markets. However, for some would-be buyers, purchasing a home remains unattainable, and renting is a more attractive option, especially as rents continue to ease.