Subscribe to TRD Data to unlock this content
The number of homes in contract in April rose moderately from the year before, but the market still struggles with a lack of inventory — especially for middle-income families.
In April, pending home sales climbed 3.2 percent year over year and 1.4 percent month over month, according to the National Association of Realtors. By region, the West (+3.8 percent), South (+4.7 percent) and Midwest (+2.7 percent) recorded yearly increases, while the Northeast saw a slight dip (-0.6 percent).
Though more deals are headed into contract, and inventory has improved over the past years, there are still fewer homes on the market that buyers are willing and able to pay for, according to another report from NAR and Realtor.com. Overall, the market has a quarter fewer homes than it would if it were balanced.
“Affordability acts like a speed limit for the housing market,” said Nadia Evangelou, principal economist at NAR. “In the last couple of years, specifically, we see more homes at a price point that [buyers] can afford. However, the gap is still very big,” which has led to more sluggish home sale growth.
Subscribe to TRD Data to unlock this content
Just 13 percent of the 100 largest metros the firms studied have reached or exceeded their threshold for a balanced market. All of these are the Midwest or Upper South. Meanwhile, most of the markets are classified as in the “moderate shortage” and “mismatch” ranges, meaning their housing conditions are improving, but supply is not aligned with local incomes.
The most affected income group is middle-class buyers who earn about $75,000 a year and can afford homes up to $261,000, according to the report. Buyers in this group only have access to about a quarter of the country’s listings, leading to a shortage of more than 311,000 properties. If the market was balanced, this figure would be closer to 44 percent.
Still, the market is improving, though the growth has been modest.
“We’re seeing a little bit of energy, because conditions have been slightly better than they have been,” said Hannah Jones, senior economist at Realtor.com, regarding NAR’s pending home sales data.
Mortgage rates are lower than they had been at the same time last year, but they are still elevated. Prices, which had hit record highs last year, are softening as well. However, affordability remains a concern for many buyers.
This sentiment also was borne out in NAR’s existing home sale data, which in April was essentially flat month over month and year over year.
Geopolitical uncertainty is also adding pressure to the market and causing financing costs and energy prices to rise.
“If you’re hearing about risks of climbing inflation or just broader economic risks, you might want to take a step back and pause before getting into the housing market and making one of the most expensive purchases that most people make in their life,” Jones said.