Pending home sales rose less than expected in March as prices soared

Pending home sales, a measure of signed contracts on existing homes, rose 1.9% in March compared with April, according to the National Association of Realtors.

Forecasters had expected a 5% gain.

Pending sales were 23.3% higher than March 2020, but that annual comparison is skewed widely because the housing market essentially ground to a halt last March at the start of the pandemic. The market then rebounded strongly last summer and is still showing incredibly strong demand.

Pending home sales are a forward-looking indicator of closed sales in one to three months.

“Low inventory has been a consistent problem, but more inventory will show up as new home construction intensifies in the coming months, as well as from a steady wind-down of the mortgage forbearance program,” said Lawrence Yun, chief economist for the Realtors. “Although these moves won’t immediately replenish low supply, they will be a step forward.”

Home prices, already sky-high, are continuing to rise at a pace not seen in over 15 years. Strong demand and record-low supply are fueling bidding wars across the nation.

Prospective buyers have lost purchasing power due to rising mortgage rates, which climbed steadily since the start of the year and more so during March. The average contract rate on the popular 30-year fixed mortgage started the month at 3.22% and ended around 3.45%, according to Mortgage News Daily. It started the year at 2.76%.

“Today’s increase signals plenty of homebuyer demand, and suggests that where buyers can find sellers, home sales will happen,” said Danielle Hale, chief economist for realtor.com. “Data show that while we saw an increase in new sellers in April, we still don’t have as many as in recent pre-pandemic years.”

Despite the rise in vaccinations, Hale says her surveys find potential sellers are still skittish about letting people tour their homes, as health concerns are among several factors keeping some sellers out of the market.

Regionally, pending home sales in the Northeast rose 6.1% for the month and fell 3.7% in the Midwest. In the South monthly sales jumped 2.9%. In the West, sales rose 2.9% in March compared with February.

Sales of newly built homes in March, which are also measured by signed contracts, jumped a much larger 21% month-to-month, as buyers frustrated with the lack of existing homes for sale have now turned to new construction.

The Realtors are projecting existing home sales to rise by 10% in 2021 to 6.2 million in 2021, while the median home price is anticipated to increase by 9% in 2021 to $323,900.