US pending home sales dive to 2-year low in April

CONTRACTS to buy US previously owned homes dropped to a 2-year low in April, the latest indication that rising mortgage rates and higher prices were dampening demand for housing.

The National Association of Realtors (NAR) said on Thursday (May 26) that its Pending Home Sales Index, based on signed contracts, fell 3.9 per cent last month to 99.3. That was the sixth straight monthly decline and pushed contracts to the lowest level since April 2020, when activity was depressed by Covid-19 lockdowns.

Pending home sales fell in the north-east, west and south, but rose in the mid-west. Economists polled by Reuters had forecast contracts, which become sales after a month or 2, would decline 2 per cent. Pending home sales dropped 9.1 per cent in April on a year-on-year basis.

Data last week showed sales of previously owned homes declined to the lowest level in nearly 2 years in April as house prices jumped to a record high amid a persistent lack of inventory. New home sales are also at a 2-year low.

According to the NAR, rising mortgage rates have raised the cost of purchasing a home by more than 25 per cent from a year ago, with the steeper home prices adding another 15 per cent.

The 30-year fixed-rate mortgage is averaging 5.25 per cent, according to data from mortgage finance agency Freddie Mac.

SEE ALSO

US new home sales drop 16.6% in April: govt

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The Federal Reserve has raised its policy interest rate by 75 basis points since March. The US central bank is expected to hike that rate by half a percentage point at each of its next policy meetings in June and July. REUTERS