Pending home sales fell for the sixth straight month, down 3.9% in April from the month prior and 9.1% YOY, according to the National Association of Realtors (NAR) Pending Home Sales Index (PHSI).
The PHSI looks at contract signings as an indicator of home sales, with a reading of 100 equal to contract signing activity in 2001. It registered a reading of 99.3 in April.
Only the Midwest saw an increase in pending sales, while the three other regions saw declines.
Pending home sales transactions in the South fell by 4.7% to an index of 119.0, down 10.3% YOY. The index in the West slipped 4.3% in April to 85.9, a 10.5% decrease YOY.
“Pending contracts are telling, as they better reflect the timelier impact from higher mortgage rates than do closings,” said Lawrence Yun, NAR’s chief economist.
“The latest contract signings mark six consecutive months of declines and are at the slowest pace in nearly a decade.”
Yun expects existing-home sales to fall by 9% in 2022, and for home prices to moderate to 5% by the of the year. If rates reach 6%, however, sales could fall by 15%.
He noted that most homeowners are enjoying wealth gains from skyrocketing equity or from refinancing to a low-interest rate.
“However – in this present market – potential homebuyers are challenged and thus may attempt to mitigate the rising cost of ownership by opting for a 5-year adjustable-rate mortgage or by widening their geographic search area to more affordable regions.”
ARMs have risen in popularity because they tend to be cheaper than conventional loans. It is being reported that the typical homebuyer could save an estimated $15,582 over five years if they take out an adjustable-rate mortgage.
“The advantage to that is you are getting a lower rate in hopes that at some point in the next year or two that rates go down and you can refinance into a fixed-rate mortgage at a lower rate,” said Jerry Stover of Homeowner Mortgage.