April 2023’s Pending Home Sales Index Report (PHSI) published by the National Association of Realtors (NAR) found a mixed bag of results during the month as pending home sales were unchanged in April from March, and down year-over-year from 2022.
While pending home sales recorded no change from March nationally, three of the four major geographic regions of the country did see increases in pending home sales with the Northeastern region of the country being the outlier reporting a decrease in sales.
The PHSI, a forward-looking indicator of home sales based on contract signings, remained at 78.9 in April, posting no change from the previous month. Year-over-year, pending transactions dropped by 20.3%. The Index was benchmarked at a level of 100 based on the level of market activity in 2001
"Not all buying interests are being completed due to limited inventory," said NAR Chief Economist Lawrence Yun. "Affordability challenges certainly remain and continue to hold back contract signings, but a sizeable increase in housing inventory will be critical to get more Americans moving."
By the numbers, as highlighted by the NAR:
- The Northeast PHSI dropped 11.3% from last month to 59.1, a decrease of 21.8% from April 2022. The Midwest index improved 3.6% to 78.4 in April, down 21.4% from one year ago.
- The South PHSI increased 0.1% to 99.6 in April, sinking 16.7% from the prior year.
- The West index augmented 4.7% in April to 62.2, sliding 26.0% from April 2022.
- At 99.6, the PHSI in the South is only slightly lower than 100, which is equal to the average level of contract activity during 2001, the first year NAR analyzed the PHSI.
"Minor monthly variations in regional activity are typical," said Yun. "However, cumulative results over many years clearly point towards a much greater number of home sales in the South. The South's pending home sales activity is similar to that of 2001, but the Midwest's activity has decreased by 22% in that same period, and the Northeast and West regions are both about 40% lower than they were in 2001," Yun added.
Realtor.com Chief Economist Danielle Hale had this to say about the report:
“Pending home sales data highlighted the ongoing inventory challenges in the existing home market, slipping lower even as new home sales in the same period ticked higher. Despite the slip, contract signings remained above the fourth quarter’s low levels. Because contract signings are the first major step in a home sale transaction, today’s index signals that the market faces continued headwinds from low inventory and affordability. Although buyers, sellers, and builders are all more optimistic about the housing market, asking home price growth is easing and the typical home sales price is slipping. These point to the nudge that buyers need to act on their improving outlook.”
“So far, homebuyer interest has held up reasonably well despite expected economic slowing, as we near the end of the Fed’s tightening cycle and a new wildcard in the U.S. debt ceiling negotiation. With uncertainties looming, potential buyers have a lot to consider. My expectation is that an agreement is reached to end the U.S. debt stalemate, and existing home sales will continue to muddle along while the new homes market continues to outperform.”
Deputy Chief Economist Odeta Kushi of First American Financial Corporation also commented on the report saying that the PHSI revealed a sluggish start to the spring home-buying season:
“The spring season is the most important time of the year for the housing market and it’s off to a slow start this year. Pending-home sales in April were unchanged from the previous month.”
“The housing market has struggled to gain momentum during the industry's crucial spring home-buying season. According to data from First America Data & Analytics, historically approximately 36% of existing-home sales for the year occur from March through June.”
“Affordability remains significantly constrained compared with one year ago. Additionally, higher rates are keeping existing homeowners rate locked-in and limiting inventory. You can’t buy what’s not for sale.”
“Mortgage application trends tell a similar story. Since most home purchases include a mortgage, the volume of mortgage applications should lead home sales. The Mortgage Bankers Association’s seasonally adjusted purchase mortgage applications series has remained mostly flat since February. May has also been a slow month.”
“There are plenty of interested prospective home buyers on the sidelines, but volatile mortgage rates, economic uncertainty, and limited inventory discourages prospective buyers and holds back sales activity,” Kushi concluded.