WASHINGTON (Reuters) – Contracts to buy U.S. previously owned homes dropped to a two-year low in April, the latest indication that rising mortgage rates and higher prices were dampening demand for housing.
The National Association of Realtors (NAR) said on Thursday its Pending Home Sales Index, based on signed contracts, fell 3.9% last month to 99.3. That was the sixth straight monthly decline and pushed contracts to the lowest level since April 2020, when activity was depressed by COVID-19 lockdowns.
Pending home sales fell in the Northeast, West and South, but rose in the Midwest. Economists polled by Reuters had forecast contracts, which become sales after a month or two, would decline 2.0%. Pending home sales dropped 9.1% in April on a year-on-year basis.
Data last week showed sales of previously owned homes declined to the lowest level in nearly two years in April as house prices jumped to a record high amid a persistent lack of inventory. New home sales are also at a two-year low.
According to the NAR, rising mortgage rates have raised the cost of purchasing a home by more than 25% from a year ago, with the steeper home prices adding another 15%.
The 30-year fixed-rate mortgage is averaging 5.25%, according to data from mortgage finance agency Freddie Mac (OTC:).
The Federal Reserve has raised its policy interest rate by 75 basis points since March. The U.S. central bank is expected to hike that rate by half a percentage point at each of its next policy meetings in June and July.