NEW YORK CITY, New York: In April, contracts to buy previously owned homes in the U.S. dropped to a two-year low, indicating that rising mortgage rates and higher prices are affecting the demand for housing.
Last week, the National Association of Realtors (NAR) said that based upon signed contracts, its Pending Home Sales Index fell 3.9 percent last month to 99.3, the sixth consecutive monthly decline, pushing contracts to their lowest levels since April 2020 during the COVID-19 pandemic.
While pending home sales rose in the Midwest, they fell in the Northeast, West and South.
Meanwhile, economists polled by Reuters predicted that contracts that become sales after a month or two would drop 2.0 percent, while in April, pending home sales declined 9.1 percent on a year-on-year basis.
According to last week’s data, in April the sales of previously owned homes declined to the lowest level in nearly two years, as house prices jumped to a record high amidst persistent short supplies. New home sales are also at a two-year low.
The NAR stressed that rising mortgage rates have increased home purchasing costs by more than 25 percent from last year, with steeper home prices adding another 15 percent.
According to mortgage finance agency Freddie Mac, a 30-year fixed-rate mortgage is averaging 5.25 percent.
Since March, the Federal Reserve Bank raised its policy interest rate by 75 basis points, and is expected to hike that rate by half a percentage point at each of its next policy meetings in June and July.