Interest rates are rising, the price of everything is increasing and people are hanging on tightly to their hard-earned cash. What does this mean for the housing market?
According to the National Association of REALTORS® (NAR), contract signings have declined since late 2021. Despite this downward trend, May brought a surprise to the real estate realm. According to the NAR’s Pending Home Sales Index, contract signings increased by 0.7%, breaking the six-month lag in pending home sales.
Are Contract Signings Rising Everywhere?
When you break the NAR’s data down by region, it’s more variable. The real estate markets in the Northeast and South are seeing that encouraging increase in contract signings. In the West and Midwest, we’re actually seeing a decrease in pending sales.
Why don’t we see the same trend across the country? Here are a few explanations:
- Homes might be priced higher in the West and Midwest, causing them to sit on the market longer than in other regions of the country.
- The general cost of living might be lower in the Northeast and South, giving potential buyers in these regions a little extra money to spend on a home.
- When you factor in the rising interest rates, the monthly mortgage payment on a home has increased dramatically (possibly by $800 per month or more), causing affordability issues across the board.
Will This Increase in Contract Signings Continue?
Although this May increase is encouraging, it doesn’t mean an upward trend is here to stay. We’re still seeing rising interest rates and high home prices, which is bound to make buyers hold off until market conditions improve.
In addition, despite the increase, the NAR reports that pending home sales were actually down 13.6% since spring 2021. This statistic tells us we have a long way to go before the real estate market bounces back.
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