Pending home sales declined month over month in March—the first decline since November 2022—according to a new report by the National Association of REALTORS® (NAR).
The Pending Home Sales Index (PHSI), a leading indicator of home sales, dropped by 5.2% to 78.9 from February to March, with monthly declines in three U.S. regions, while the South saw an increase in contract signings.
Pending sales nationwide fell year over year by 23.2%, with annual declines in all four regions. A PHSI of 100 is equivalent to the level of contract signings in 2021.
The lack of housing inventory is a major constraint to rising sales. Multiple offers are still occurring on about a third of all listings, and 28% of homes are selling above list price. Limited housing supply is simply not meeting demand nationally. Lawrence Yun - NAR Chief Economist
NAR FORECASTS FOR THE REST OF 2023
NAR’s predictions for the rest of 2023 include the following:
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Continued job growth, though at a slower pace
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Mortgage rates will fall, with the rate for the 30-year-fixed mortgage dropping to 6.0% this year—and to 5.6% in 2024.
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Housing starts will decline from 2022 by 7.3% to 1.44 million—and then climb 6.9% in 2024 to 1.54 million
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Existing home sales will steadily increase in the coming months, but the annual figure will still fall short of last year by 9.3%, falling to 4.56 million, before climbing back up 15.4% in 2024 to 5.26 million.
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Newly constructed home sales will grow from last year by 4.5% to 670,000—thanks to a greater supply of inventory in this segment of the housing market—and will climb another 11.9% in 2024 to 750,000.
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Compared to 2022, median existing-home prices will, for the most part, stabilize, with the national median existing-home price falling by 1.8% to $379,600 in 2023 and then rising by 2.8% to $390,000 in 2024.
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The pricey West region will see a decline in prices, while the affordable Midwest region will likely see a small increase.
- The median new home price will be 1.9% lower in 2023, compared to last year, falling to $449,100, but will increase by 4.2% to $468,000 in 2024.
Sales in the second half of the year should be notably better than the first half as job gains continue and more favorable mortgage rates are expected. Sales of new homes are already matching 2019 pre-COVID activity and are expected to increase in 2023, largely due to plentiful inventory in this segment of the market. - Lawrence Yun - NAR Chief Economist
REGIONAL BREAKDOWN OF PENDING HOME SALES (PHSI)
The Northeast PHSI declined by 8.1% from February to March to 66.6, a 24.3% annual drop from March 2022. The Midwest PHSI fell 10.7% month over month to 75.7 in March, falling 21.5% from a year ago.
Posted by:
Sarah Lentz
May 2, 2023
