US Pending Home Sales Rise for Third Consecutive Month as Lower Mortgage Rates Offer Temporary Relief

Contracts to buy previously owned homes in the United States increased for a third straight month in April, suggesting that a short-term decline in mortgage rates encouraged more buyers to return to the housing market.

According to data released by the National Association of Realtors (NAR), pending home sales rose more than economists had expected. However, analysts remain cautious about the outlook for the housing sector, arguing that elevated mortgage rates and affordability pressures continue to limit stronger growth.

Economists Remain Skeptical About Housing Recovery

Despite the increase in pending sales, many economists believe the U.S. housing market is unlikely to experience a significant recovery in the near future.

Experts point to persistently high mortgage rates, limited housing inventory and weaker consumer confidence as major obstacles. Slower population growth, partly linked to reduced immigration, is also expected to weigh on future housing demand.

Oliver Allen, senior economist at Pantheon Macroeconomics, said there is little indication of a meaningful rebound in housing activity, citing labor market weakness and declining consumer sentiment as additional pressures.

Pending Home Sales Beat Expectations in April

The NAR reported that its Pending Home Sales Index rose 1.4% in April to 74.8. Economists surveyed by Reuters had expected an increase of 1.0%.

Regional performance varied significantly:

• Northeast: +6.6%
• Midwest: +3.0%
• West: +0.4%
• South: -0.7%

Compared with the same period a year earlier, pending home sales increased by 3.2%.

Pending home sales measure signed contracts for existing homes and typically convert into completed sales within one or two months.

Mortgage Rates Continue to Pressure Buyers

Mortgage borrowing costs remain one of the biggest challenges facing the housing market.

Data from Freddie Mac showed the average rate on a 30-year fixed mortgage climbed to 6.46% at the beginning of April, partly driven by higher oil prices and rising U.S. Treasury yields amid geopolitical tensions in the Middle East.

Earlier, rates had briefly fallen below 6%, helping improve affordability and encouraging buyer activity. However, mortgage rates later moved higher again, averaging 6.30% by the end of April and recently rising to around 6.36%.

Higher financing costs continue to reduce affordability for many prospective homebuyers.

Inventory Shortages and High Prices Persist

Limited supply remains another major issue for the U.S. housing market.

The inventory of existing homes remains significantly below pre-pandemic levels, with shortages especially severe in the entry-level housing segment. This imbalance has continued supporting elevated home prices.

Recent Federal Housing Finance Agency data showed the median single-family home price increased 1.7% over the 12 months through February.

At the same time, tariffs on imported materials, including lumber, alongside higher labor and construction costs, continue to increase expenses across the housing sector.

Homebuilder Sentiment Remains Weak

Confidence among homebuilders stayed subdued in May, according to recent survey data.

Builders cited high mortgage rates, economic uncertainty linked to geopolitical tensions, rising land prices and elevated construction costs as key concerns limiting activity.

Residential investment, including home construction and broker commissions, has now declined for five consecutive quarters, highlighting continued weakness across the sector.

Outlook: Housing Market Recovery May Remain Slow

Economists expect the housing market to remain under pressure for much of the year.

Nancy Vanden Houten, lead U.S. economist at Oxford Economics, noted that rising interest rates, uncertain economic conditions and higher fuel costs affecting household budgets are likely to suppress home sales in the months ahead.

Many analysts believe a stronger recovery in housing demand may not emerge until later in the year if borrowing costs begin easing and economic confidence improves.