Pending home sales are down. What does that mean for buyers and sellers?
Pending sales of single-family homes dropped between May and July 2022 as buyers grappled with escalating mortgage rates and consistently high housing prices.
Pending sales, which represent a home that has gone under contract but hasn't yet closed, is just one key housing market standard of measure to recently fall dramatically along with new home sales, existing home sales and new residential construction which have dropped under the weight of higher mortgage rates.
“Contract signings to buy a home will keep falling as long as mortgage rates keep climbing, said Lawrence Yun, a spokesperson for NAR, (National Association of Realtors). Buyers are pulling back as rates rise and homes remain costly. Once again, according to NAR, buying a home in June 2022 was about 80% more expensive than buying one in June 2019 meaning nearly a quarter of the buyers who purchased property in June 2019 no longer earn the qualifying income to purchase one today.
The bottom line is, home sales will be down in 2022. However, with mortgage rates expected to stabilize and job growth remains consistent, home sales should start to rise again by early in 2023.
Some experts saw a market slow down as a welcome sign of a much-needed shift which was necessary to cool down a market that saw no signs of stopping over the past two years.
Combined with the increase in housing supply and moderating prices, we could see improved opportunities for homebuyers later in the year. The result is that we are seeing a shift in a housing market in need of a refresh.