What the April pending home sales data shows
Pending home sales fell 6.3% in April as climbing mortgage rates and widespread economic uncertainty caused many prospective homebuyers to hesitate before making major financial commitments. Contract signings were down 2.5% compared to last April, hindered by still-high mortgage rates. A recent Realtor.com survey reveals that concerns of a recession are rising, which can have an impact on homebuying decisions as households brace for potential financial strain. Consumer confidence took a hit in April as the ongoing trade war hit a fever pitch early in the month and sweeping tariffs were announced. Though the administration took a step back from many of the most severe measures, concerns remain about their potential impact on prices, including for newly built homes. Although inflation dipped to a multi-year low in April, the economic outlook remains uncertain. The delayed impact of recently implemented tariffs could introduce new cost pressures as they filter through the broader economy.
New home sales, which are also based on contract signings, picked up in April despite challenging market conditions. Activity in the new construction sector is being driven by smaller, more affordable home sales. The share of homes sold for less than $400,000 picked up annually in April, emphasizing this trend.
All four regions saw contract signings fall on a monthly basis, led by the West (-8.9%) and the South (-7.7%). The Midwest (-5.0%) and the Northeast (-0.6%) saw less severe monthly declines, and the Midwest was even slightly higher (+2.2%) compared to one year prior. The West (-6.5%), South (-3.0%) and Northeast (-3.0%) all saw falling pending home sales on an annual basis.
What this means for buyers, sellers, and the housing market
Pending home sales, or contract signings, measure the first formal step in the home sale transaction, namely, the point when a buyer and seller have agreed on the price and terms. Pending home sales tend to lead existing home sales by roughly one-to-two months and are a good indicator of market conditions. Existing home sales eased in April as buyers continued to struggle with high home prices and mortgage rates. However, ample home supply could encourage buyers to get into the market this summer, especially as elevated price reductions suggest sellers are ready to negotiate.