A report released by the National Association of Realtors on Thursday unexpectedly showed a steep drop in pending home sales in the U.S. in the month of March.
NAR said its pending home sales index plunged by 5.2 percent to 78.9 in March after climbing by 0.8 percent to 83.2 in February. Economists had expected pending home sales to increase by 0.5 percent.
Pending home sales decreased for the first time since November 2022 but are down by 23.2 percent compared to the same month a year ago.
A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
“The lack of housing inventory is a major constraint to rising sales,” said NAR Chief Economist Lawrence Yun. “Multiple offers are still occurring on about a third of all listings, and 28% of homes are selling above list price. Limited housing supply is simply not meeting demand nationally.”
The unexpected monthly slump by pending home sales reflected steep drops in pending sales in the Midwest, Northeast and West, which more than offset an uptick in pending home sales in the South.
NAR forecast existing home sales will steadily improve in the upcoming months but will still come up short on an annual basis.
Existing home sales are expected to tumble by 9.3 percent year-over-year to 4.56 million in 2023 before surging by 15.4 percent to 5.26 million in 2024.
Meanwhile, new home sales are expected to jump by 4.5 percent to 670,000 in 2023 and spike by another 11.9 percent to 750,000 in 2024.
NAR expects the national median existing home price to decrease by 1.8 percent to $379,600 in 2023 before rebounding by 2.8 percent to $390,000 in 2024.
The median new home price is expected to fall by 1.9 percent to $449,100 in 2023, followed by a 4.2 percent improvement to $468,000 in 2024.
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