Housing Contract Activity Shows Resilience Amid Rising Mortgage Rates
In March, housing contract activity witnessed a modest increase of 1.5%, indicating that prospective buyers are still actively pursuing home purchases, even amid rising mortgage rates and prevailing economic uncertainties.
Starting the month at approximately 6%, mortgage rates saw a swift uptick due to ongoing geopolitical tensions, particularly the Iran conflict. By the end of March, rates had escalated to around 6.46%, influenced by inflationary pressures and surging oil prices.
Lawrence Yun, the chief economist at the National Association of Realtors (NAR), commented on the situation, stating, “Contract signings rose in March despite higher mortgage rates, pointing to pent-up housing demand. A greater supply of inventory will help translate that demand into more home sales.”
While the initial signs for the spring homebuying season are coming through, the data presents a mixed picture. Existing home sales dipped by 3.6% in March, though it is likely these transactions were agreed upon earlier in the year. On a year-over-year basis, although pending home sales rose compared to February, they fell by 1.1% according to recent NAR statistics.
Regionally, contract activity was most robust in the Northeast, where signings increased by 4.4% from February. The South also saw a notable rise of 3.9%, while the Midwest and Western regions experienced declines. Remarkably, the South was the only region to record a year-on-year increase in activity.
Interestingly, home prices in several Southern cities are showing signs of decline, even as job growth remains strong. Yun posits that this combination may lead to a more vigorous housing market in the South for the remainder of the year.
Several metropolitan areas in the Southeastern United States reported significant year-on-year increases in contract activity: Austin, Texas, saw a 12.8% rise, with Raleigh, North Carolina, not far behind at a 10% increase. Other cities, such as Richmond and Virginia Beach in Virginia, recorded an 8.5% growth in housing contracts.
Homes usually go under contract one to two months prior to their sale, making pending home sales a crucial early indicator for upcoming sales trends. However, it’s worth noting that some deals may fail before finalisation.
As the housing market continues to navigate challenges posed by rising mortgage rates and economic shadows, it remains to be seen how these dynamics will reshape buyer behaviour and market conditions in the coming months.
Author: Claire Boston, Senior Reporter for Yahoo Finance, specialising in housing, mortgages, and home insurance.
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