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• Pending home sales in the US rose for the third consecutive month in April, supported by a brief dip in mortgage rates.
• The National Association of Realtors reported a 1.4% monthly increase, which was higher than economists’ expectations of 1.0%.
• Regional trends were mixed, with strong gains in the Northeast and Midwest, while the South saw a decline.
• Despite the rise, overall housing demand remains weak due to high borrowing costs and tight housing supply.
• Economists expect subdued market activity to continue as affordability pressures and elevated mortgage rates persist.
Contracts to purchase previously owned homes in the US increased for the third straight month in April, supported by a short-lived dip in mortgage rates that briefly improved buyer activity. Advertisement
Data released by the National Association of Realtors earlier this week showed that pending home sales rose 1.4% in April to 74.8. This was higher than economists’ expectations, which had projected a 1.0% rise. On a yearly basis, pending home sales were up 3.2%.
Market performance remained uneven across regions. The Northeast recorded a strong increase of 6.6%, followed by a 3.0% rise in the Midwest. The West saw a modest gain of 0.4%, while the South registered a decline of 0.7%.
Despite the monthly gains, economists maintained that the broader housing demand remains weak. They noted that mortgage rates are still elevated compared to the start of the year, keeping borrowing costs high and limiting affordability for many buyers. Inventory levels also remain tight, particularly in the entry-level segment, which continues to support elevated home prices.
According to commentary from Pantheon Macroeconomics, the outlook for a strong recovery in housing market activity appears limited in the near term. The assessment pointed to slower population growth, weaker labour market conditions, and reduced consumer confidence as additional factors weighing on demand.
Mortgage rate movements also remained a key factor influencing market sentiment. Data from mortgage finance agency Freddie Mac showed that the 30-year fixed mortgage rate had increased to around 6.46% at the beginning of April, after briefly easing earlier. By the end of the month, it averaged near 6.30% and has since moved slightly higher. The rate typically tracks US Treasury yields and reacts to broader financial and geopolitical developments.
The housing sector has continued to face pressure this year due to high borrowing costs, tariffs on imported materials such as lumber, and constrained supply. Residential investment, which includes home construction and related brokerage activity, has recorded contractions for several consecutive quarters.
A separate survey of homebuilders also indicated subdued sentiment, with high land, labour, and construction costs continuing to weigh on activity. Concerns around economic uncertainty and external geopolitical tensions were also cited as limiting factors.
Housing inventory remains significantly below pre-pandemic levels, a shortage that is most pronounced in starter homes. Data from the Federal Housing Finance Agency indicated that single-family home prices have continued to rise modestly, reflecting persistent supply constraints.
Economists from Oxford Economics noted that higher interest rates, rising fuel costs, and an uncertain economic environment are likely to keep housing market activity subdued for the rest of the year. They added that even with occasional monthly improvements, sustained recovery will depend on a more meaningful easing of borrowing costs and improved supply conditions.
Source Reuters
5th Jun, 2025
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