Home buyers are finding the highest number of homes for sale in years this spring, yet sales are falling short of expectations for what was expected to be a robust selling season. Economists say elevated mortgage rates are to blame.
“At this critical stage of the housing market, it is all about mortgage rates,” says Lawrence Yun, chief economist at the National Association of REALTORS®. “Despite an increase in housing inventory, we are not seeing higher home sales. Lower mortgage rates are essential to bring home buyers back into the housing market.”
Mortgage rates have remained stubbornly in the high 6% range, which may be giving some buyers cold feet in an atmosphere of still-rising home prices. NAR’s Pending Home Sales Index—a forward-looking indicator of home sales based on contract signings—fell 6.3% in April compared to March. Pending sales were down 2.5% year-over-year.
Yun noted in a press conference call last week that the number of canceled contracts has been increasing. Seven percent of sales contracts were terminated in the last three months, up from 4% a year ago, according to the latest REALTORS® Confidence Index Survey, based on feedback from about 1,500 real estate professionals on their most recent transactions. That dampens the optimism that was sparked by March’s pending home sales report, which showed a 6.1% month-over-month surge in contract signings—the largest jump since December 2023. While the data doesn’t indicate why contract cancellations are up, Yun has speculated that elevated mortgage rates may be to blame, pushing buyers to the edge of affordability.
But buyers jumping in the market may be finding an advantage: more For Sale signs. Housing inventory has climbed nearly 21% from a year ago, according to NAR’s data. “With housing inventory levels reaching five-year highs, home buyers in nearly every region of the country are in a better position to negotiate more favorable terms,” Yun says.
Regional Breakdown
Home buyers may be faring best this spring in the Midwest, where home prices tend to be less expensive than other parts of the country. While pending sales contracted 5% in April month-over-month in the region, existing-home sales—reflecting closed sales—rose 2.1% in the Midwest last month, the highest of any other region.
If housing affordability is a driver, “home buyers have a better chance to purchase homes in affordable regions such as the Midwest,” where the typical home price is $313,000—25% below the national median home price, Yun says.
Here’s a closer look at how contract signings fared across the country in April, according to NAR’s latest Pending Home Sales Index:
- Northeast: Contract signings fell 0.6% from March, also down 3% compared to a year ago.
- Midwest: Pending sales dropped 5% from March but were still up 2.2% compared to 2024.
- South: Contract signings decreased 7.7% in April and were down 3% from a year ago.
- West: Pending sales fell 8.9% in April and were down 6.5% from April 2024.
