- According to National Association of REALTORS®, February was first month showing annual decline in pending sales in 8 months
- Decline of -10.6% m/m in pending home sales in February
Pending Home Sales Fell -10.6% m/m in February
The National Association of REALTORS® (NAR) indicated that pending home sales dropped -10.6% m/m in February. This is the first decline in pending home sales on an annual basis in eight months.
Low Inventory Considered to Be the Culprit
According to Lawrence Yun, chief economist with NAR, lack of for-sale homes is the main problem, Yun said, “The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market (DOM) are swift but contracts are not clicking due to record-low inventory.”
Yun also said, “Only the upper-end market is experiencing more activity because of reasonable supply.”
Increase of 3.5% in Mortgage Rates Considered to be Tops in 2021
Yun believes that mortgage interest rates will not exceed a +3.5% increase through the end of 2021 due to the Federal Reserve’s pledge to keep rates low until 2023. He also believes that though rates have been increasing since the beginning of 2021, he does not see tapering demand due to recent increases in mortgage rates.
Demand Continues to Outstrip Supply
Homes priced within and just above the $250,000 range have been the market drivers over the last several months. Now, according to Yun, homes priced within the range of $500,000 – $1,000,000 are seeing an uptick in demand. The result? Increased demand across multiple price points is causing more widespread supply deserts.
Yun said, “Potential buyers may have to enlarge their geographic search areas, given the tight market (across more price tiers). If there were a larger pool of inventory to select from – ideally a five- or six-month supply – then more buyers would be able to purchase properties at an affordable price.
All Four-Market Regions Saw Pending Home Sales Drop in February
Nationwide, pending home sales fell -10.6% m/m in February. Each of the four regions of the country experienced different percentage drops m/m in pending home sales:
- Northeast – -9.2% m/m and -3.9% y/y
- Midwest – -9.5% and -6.1% y/y
- South – -13.0% and +2.9% y/y
- West – -7.4$ and +1.9% y/y
Thanks to the National Association of REALTORS® and Inman.
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