A gauge of U.S. pending home sales fell in March for a fifth straight month as rising borrowing costs put pressure on a market already squeezed by low inventory and high prices.
The National Association of Realtors’ index of pending home sales decreased 1.2% from a month earlier to 103.7, the lowest since May 2020, according to data released Wednesday. Economists in a Bloomberg survey called for a 1% drop.
Homes are getting increasingly unaffordable as rising mortgage rates strain buyers already grappling with high prices and low inventory. A gauge of U.S. mortgage applications tumbled last week to the lowest level since late 2018 as the average 30-year contract rate rose to 5.37%, the highest since 2009.
The Federal Reserve is expected to hike interest rates next month by the most since 2000 in a stepped-up fight against decades-high inflation.
“The sudden large gains in mortgage rates have reduced the pool of eligible homebuyers, and that has consequently lowered buying activity,” NAR’s chief economist Lawrence Yun said in a statement. “The aspiration to purchase a home remains, but the financial capacity has become a major limiting factor.”
By region, contract signings fell in all regions except the Northeast.
Compared with a year earlier, contract signings were down by 8.9% on an unadjusted basis.
The pending home sales index is based on contract signings, rather than when a contract closes like existing home sales. Sales of previously owned U.S. homes fell in March to the lowest since June 2020.