Pending home sales fall by 21% in April

Home sales contracts during April took a big hit due to the COVID-19 pandemic, but things are expected to pick up from here on out, according to the National Association of Realtor’s latest report.

Published Thursday, the NAR’s latest Pending Home Sales Index, which is a forward-looking indicator of home sales based on contract signing, fell 21.8% in April compared to the same month one year ago. April marked the second consecutive month of declining pending home sales, due to social distancing measures and widespread business closures that resulted from the coronavirus outbreak. Each major region in the U.S. saw a big drop in home sales activity, the NAR said.

The report said April’s decline was the largest decrease in pending home sales since the NAR began tracking the data in 2001.

“With nearly all states under stay-at-home in April, it is no surprise to see the markedly reduced activity in signing contracts for home purchases,” said Lawrence Yun, the NAR’s chief economist.

Yun said however that he’s optimistic that April’s pending home sales will be a low point, and that May will therefore be the lowest point for closed sales. He said he expects a rebound in the housing market in the summer months.

“While the coronavirus mitigation efforts have disrupted contract signings, the real estate industry is ‘hot’ in affordable price points with the wide prevalence of bidding wars for the limited inventory,” Yun said. “In the coming months, buying activity will rise as states reopen and more consumers feel comfortable about home buying in the midst of the social distancing measures.”

More reason behind housing’s optimism: Mortgage applications have been rising over the last few weeks, a gauge used to measure future home sales.

“Given the surprising resiliency of the housing market in the midst of the pandemic, the outlook for the remainder of the year has been upgraded for both home sales and prices, with home sales to decline by only 11% in 2020 with the median home price projected to increase by 4%,” Yun said. “In the prior forecast, sales were expected to fall by 15% and there was no increase in home price.”