In a grim sign for the housing market’s busiest season, pending home sales, which measure signed contracts on existing homes, fell 4.1% in February compared with January, according to the National Association of Realtors.
Sales were down 5.4% compared with February 2021. Analysts expected a slight increase. Analysts were expecting a slight increase in sales pending this month. This indicator is a good indication of future closures within one or two months.
The market’s reaction to new rates is evident in this indicator, particularly as the spring season approaches. This count relies on the signed contracts that were made back in February.
The rates rose sharply from January to February, with the average rate rising by 1%. Now, the average 30-year fixed rate is more than one percentage point higher than last year.
In the Northeast, sales pending rose by 1.9% from month to month but fell 9.2% compared to a year earlier. The Midwest saw sales decline 6.0% in February and a 5.2% drop from February 2021. Sales in the South fell by 4.4% per month, 4.3% annually and 5.4% respectively. In contrast, West sales were 5.4% lower for the month, 5.3% less than a year ago, and 5.3% below a year.
It could not have happened at a more perfect time as spring is traditionally the busiest season on the market for housing.
Paul Legere, buyer’s agent at Joel Nelson Group, Washington, D.C., stated that “most of my buyers” are shifting their goal to get the house they want. At least in my market, buyers don’t choose to rent.
Potential buyers today are in a very competitive market. Today, a median monthly mortgage payment is now greater than the average consumer’s household income. The Mortgage Bankers Association has released a new index that shows the increase in monthly payments by 8.3% in February. The February 2021 figure was almost 222% lower than the current value. The monthly payments for borrowers at the lowest end of the market are almost 10% higher than they were in February 2021.
From December 2021 to February 2022, the 30-year fixed-rate mortgage rose by 73 basis point. “Also, with an increase in loan applications, the median principal-and interest payment for mortgage applicants in February rose $127 from Jan and $337 from one years ago,” Edward Seiler from MBA, MBA’s associate vice President of housing economics.
The market is still very tight. They now need to consider inflation when planning their budgets. According to Realtor.com, the list prices of homes have accelerated again after a short reprieve in fall last year.
According to George Ratiu (senior economist at Realtor.com), “As we enter the spring season markets are clearly tilted towards sellers’ favor.” We are beginning to see signs of a shift, however, because mortgage rates have risen towards 5%. This means that many homeowners who were looking for homes may be unable to pay the required monthly payments.