The number of U.S. home purchase contracts closing fell by the most in three years in April, with overall activity levels at their lowest since the COVID-19 pandemic began in the spring of 2020, as high interest rates continue to restrain the housing market, the National Association of Realtors said Thursday.
NAR is Pending Home Sales Index The index fell 7.7% to 72.3 in April from an upwardly revised 78.3 in March.
The drop was the biggest since February 2021, and pushed the index level to its lowest since April 2020, when it hit a record low of 71.8.
The index is intended to forecast home sales transactions that will be completed in the next one to two months.
“The impact of rising interest rates throughout April has slowed home buying even as inventory builds on the market,” said NAR chief economist Lawrence Yun. “But the Federal Reserve’s expected rate cuts later this year should improve homebuying, increase supply and help the situation.”
The Federal Reserve has raised interest rates by 5.25 percentage points since March 2020 to combat inflation.
Interest rates have been left unchanged since July last year, and up to three cuts of 0.25 percentage points were expected this year, but the Fed’s stance changed after inflation was higher than expected so far this year.
Bond market pricing currently reflects the expectation of no more than two rate cuts this year.
