Just when the housing market appeared to be improving, March snapped it back to reality.
Pending home sales dropped last month, breaking a three-month streak of increases, according to a report from the National Association of Realtors. The organization’s Pending Home Sales Index, which looks forward based on contract signings, dropped 5.2 percent from February.
The index hit 78.9 in March — a 100 would signify contract activity matching 2001 levels. Pending transactions dropped 23.2 percent year-over-year, a steeper decline than the 21.1 percent annual decrease recorded in February.
The sudden drop after months of gains could have some buyers and sellers having flashbacks to the months of declines attached to last year’s mortgage rate spike. Rates are leveling out, however, and appear poised to continue to do so this year, depending on future action from the Federal Reserve.
Instead, tight inventory is the culprit behind the metric’s largest drop since September.
“The lack of housing inventory is a major constraint to rising sales,” NAR chief economist Lawrence Yun said in a statement. That constraint could be a boon to sellers, as Yun noted multiple offers are still coming on a third of listings and more than a quarter of homes are selling above list price.
Limited housing supply is simply not meeting demand nationally,” Yun said.
The South stood out as the region that saw gains in pending sales, while the others recorded decreases. It was a marginal gain, but pending home sales in southern states improved 0.2 percent and were only a few tenths off of 2001 levels.
Each of the other three regions recorded losses in pending home sales from February to March, paced by a 10.7 percent drop in the Midwest. All four regions tracked by the home index recorded year-over-year declines of at least 19 percent.
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