US pending home sales gauge slumps to a four-year low on rates
A GAUGE of pending United States existing-home sales tumbled to a four-year low in April as higher mortgage rates cast a pall on the spring selling season.
An index of contract signings from the National Association of Realtors (NAR) dropped 7.7 per cent to 72.3, the lowest reading since the early months of the pandemic.
The monthly decline was steeper than all estimates in a Bloomberg survey of economists and the worst since February 2021. All US regions saw decreases from a month earlier.
“The impact of escalating interest rates throughout April dampened home buying, even with more inventory in the market,” NAR chief economist Lawrence Yun said. “But the Federal Reserve’s anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply.”
Contract closings on previously owned homes have been stuck near the annualised four million mark for more than a year as buyers struggle with high prices and mortgage rates near 7 per cent.
At the same time, sellers are reluctant to give up mortgages carrying much lower rates.
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Sales were well over six million a year at the height of the pandemic-era buying spree in fall 2020.
New data suggest buyers are not getting any relief on costs, either. Prices in 20 major US cities actually picked up the pace in March, rising 7.4 per cent from a year ago, according to an S&P CoreLogic Case-Shiller index.
Price increases should finally taper off when more inventory hits the market, Yun said on Thursday (May 30), although for now, the 1.2 million homes on the market are well below pre-pandemic levels.
“The prospect of measurable home price declines appears minimal,” Yun said. “The few markets experiencing price declines will be viewed as second-chance opportunities for buyers to enter the market if those regions continue to add jobs.”
While many are awaiting a move by the Fed to cut interest rates, officials are widely expected to keep rates at a 23-year high at their next meeting in June.
The Mid-west saw the biggest drop in pending sales, down 9.5 per cent in April, followed by declines of 8.5 per cent and 7.6 per cent in the West and South, respectively. Contract signings in the North-east fell 3.5 per cent.
The pending sales report tends to be a leading indicator of sales of previously owned homes because houses typically go under contract a month or two before they are sold. BLOOMBERG
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