US Pending Home Sales Rise More Than Expected in March
Contracts to purchase previously owned U.S. homes increased more than anticipated in March, signaling some resilience in the housing market. However, elevated mortgage rates and limited housing supply continue to act as significant constraints.
The National Association of Realtors (NAR) reported on Tuesday that its pending home sales index climbed 1.5% to 73.7. This exceeded economists’ expectations, who had forecast a more modest 0.5% increase. Pending sales typically convert into completed transactions within one to two months.
Regional Trends Show Mixed Performance
Growth in pending home sales was driven by gains in the Northeast and the populous Southern regions. In contrast, activity declined in both the Midwest and Western United States.
Despite the monthly increase, pending home sales were still down 1.1% compared to the same period last year, highlighting ongoing challenges in the housing sector.
Mortgage Rates Remain a Key Headwind
Mortgage rates continued to rise throughout March, influenced by increasing U.S. Treasury yields. These yields moved higher as geopolitical tensions in the Middle East fueled inflation concerns.
Data from Freddie Mac showed that the average rate for a 30-year fixed mortgage reached 6.38% at the end of March, up from 5.98% at the end of February. The earlier lower rates were partly supported by expanded purchases of mortgage-backed securities by Freddie Mac and Fannie Mae.
First-Time Buyers Face Growing Pressure
Lawrence Yun, chief economist at the NAR, emphasized that higher mortgage rates are particularly impacting first-time buyers, especially younger households.
He noted that improving housing affordability will require increased supply, particularly through the construction of smaller and more affordable homes.
Housing Market Weakness Persists
Recent data indicates broader softness in the housing market. Existing home sales dropped to a nine-month low in March, reflecting ongoing affordability pressures.
Housing affordability has also become a key political issue ahead of the upcoming midterm elections, as rising costs continue to challenge prospective buyers.
Builder Sentiment Declines
Further signs of strain emerged from the construction sector, where homebuilder confidence fell to a seven-month low in April.
Industry data suggests that rising energy costs—accounting for roughly 4% of residential construction expenses—are adding to the pressures facing builders and contributing to higher home prices.
