A report released by the National Association of Realtors on Thursday showed pending home sales in the U.S. plummeted by much more than expected in the month of April.
NAR said its pending home sales plunged by 3.9 percent to 99.3 in April after tumbling by 1.6 percent to a revised 103.3 in March.
Economists had expected pending home sales to descend by 2.0 percent compared to the 1.2 percent slump originally reported for the previous month.
A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
“Pending contracts are telling, as they better reflect the timelier impact from higher mortgage rates than do closings,” said NAR’s chief economist Lawrence Yun.
He added, “The latest contract signings mark six consecutive months of declines and are at the slowest pace in nearly a decade.”
Pending home sales in the Northeast led the way lower in April, showing a 16.2 percent nosedive compared to the previous month.
The report showed pending home sales in the South and West also tumbled by 4.7 percent and 4.3 percent, respectively, while pending sales in the Midwest spiked by 6.6 percent.
“The vast majority of homeowners are enjoying huge wealth gains and are not under financial stress with their home as a result of having locked into historically low interest rates, or because they are not carrying a mortgage,” Yun explained.
He continued, “However – in this present market – potential homebuyers are challenged and thus may attempt to mitigate the rising cost of ownership by opting for a 5-year adjustable-rate mortgage or by widening their geographic search area to more affordable regions.”
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