US pending home sales fall 5.2%, biggest drop since September

US pending home sales fell last month by the most since September, suggesting the housing market isn’t totally out of the woods yet.

The National Association of Realtors’ (NAR) index of contract signings to purchase previously owned homes dropped 5.2 per cent in March to 78.9, according to data released on Thursday (Apr 27). The decrease was worse than all estimates in a Bloomberg survey of economists, which called for a 0.8 per cent advance.

The pending home sales report is often seen as a leading indicator of existing-home sales, given homes typically go under contract a month or two before they’re sold. That said, homeowners who locked in low mortgage rates are reticent to list their properties, keeping supply of pre-owned homes constrained.

“The lack of housing inventory is a major constraint to rising sales,” Lawrence Yun, NAR’s chief economist, said in a statement. “Limited housing supply is simply not meeting demand nationally.”

Still, there have been some encouraging signs of stabilising in recent months. New-home sales are rising and mortgage rates have eased somewhat, which is propping up homebuilder sentiment.

A report earlier Thursday showed the US economy slowed in the first quarter by more than expected. However, residential investment posted the smallest decline in a year.

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There are pockets where demand remains strong. Yun said about a third of all listings are receiving multiple offers, and a similar share are selling above list price.

Looking ahead, borrowing costs are still elevated and will likely stay that way for some time as the Federal Reserve is poised to hike interest rates again next week before what’s anticipated to be an extended pause.

From a year ago, contract signings fell 23.3 per cent on an unadjusted basis. BLOOMBERG