Limited Inventory and Affordability Keep April Pending Home Sales Flat

Pending home sales were unchanged in April from the previous month as high prices, rising mortgage rates and limited inventory keep the homebuying market in a slump. Compared with a year ago, pending home sales fell in all four U.S. regions.

The Pending Home Sales Index, the National Association of Realtors’ indicator of home sales based on contract signings, stayed at 78.9 in April. Year-over-year, pending transactions dropped by 20.3%. But the numbers varied by geography.

How Things Changed Regionally

Contract signings improved in three regions month-over-month, but declined in the Northeast to 59.1, 11.3% lower from last month and a drop of 21.8% since last year, according to the NAR.

In the Midwest, the index improved slightly to 78.4, up 3.6% from the month before but down 21.4% from one year ago. The index was at 62.2 in the West, after increasing 4.7% over the month. It was down 26% from last year. The South saw a modest increase of 0.1%, with the index ending the end of April at 99.6, dropping 16.7% from the year before. 

The data align with activity picking up in the South, according to NAR Chief Economist Lawrence Yun. 

"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.

The Housing Market Slump Is Far From Over

Concerns about limited inventory across the U.S. may be tempered by a rise in new, single family housing starts in April. At 1.401 million, privately-owned housing starts for all residential construction in April rose 2.2% from March, but are still down 22.3% from April 2022. The uptick comes alongside an increase in National Association of Home Builders homebuilder confidence data—that reflects builder sentiment about selling newly built homes. 

"Not all buying interests are being completed due to limited inventory," said 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."