Pending House Sales Reportedly Fall for Fourth Consecutive Month: Here’s What It May Mean

by Megan Molseed
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The number of pending home sales has been declining for months now. This, experts note may suggest that the U.S. housing market may be starting to cool off. According to reports, the number of homes under contract to be sold has been slipping. However, despite the falling prices, many experts note that housing costs are not expected to decline at a marked rate anytime soon.

In fact, a decline in the number of houses for sale may instead lead to some major price increases. Furthermore, real-estate experts point out, these changes in sales and costs are unlikely to result in a burstable housing bubble.

The Quick Facts

  • The number of pending home sales has taken a dive over the last few months, indicating the market may begin to cool off.
  • Experts had predicted a slight increase in sales over this period, and the decline is creating unpredicted changes within the housing market.
  • A decrease in homes for sale may lead to price increases in the housing market.
  • However, despite these marked decreases in home sales, experts do not predict it to result in the bursting of a “housing bubble.”

The Housing Market Continues to See A Decline In Pending Home Sales Since the Start of 2022

Pending home sales, which have long been a leading indicator regarding how healthy the housing market is, have been steadily declining since the start of 2022. According to experts, pending sales rates have been declining now for four months straight. This contradicts the 1% increase that experts predicted just before the decline in pending home sales began.

“Pending transactions diminished in February mainly due to the low number of homes for sale,” notes Lawrence Yun, the chief economist for the National Association of Realtors (NAR). However, notes Yun, these declines aren’t necessarily suggesting a lack of interest in homebuying. Yun notes the cause of the shift may be caused by the contrary.

“Buyer demand is still intense,” Yun says. “But it’s as simple as ‘one cannot buy what is not for sale.’”

The Lack Of Housing Inventory Is Leading To Some Record High Prices In House Sales

The available housing inventory continues to fall, driving prices to record highs. By the end of February, NAR notes that there were about 870,000 homes available for sale. This number, the experts at NAR note, is down over 15% from one year ago. And, the prices are rising just as fast.

“The number of homes for sale remains very low and continues to shrink from last year,” notes George Ratiu, manager of economic research for Realtor.com.

“In turn, list prices re-accelerated after the reprieve experienced during fall 2021,” Ratiu explains. “Reaching a new high of $392,000 in February.”

Are We Experiencing A Housing Bubble? If So, Is It Ready to Burst?

According to a Forbes report, this fluctuating housing market does not suggest we are experiencing a bubble in the real estate market that will eventually burst. In fact, the report notes, bubbles in the real estate market are fairly rare. And, it takes a variety of scenarios to create a housing bubble. Scenarios the report says are not in play in today’s housing market.

When housing markets crash, it’s typically because the supply outweighs demand, leading to a variety of scenarios including relaxed lending standards and mortgage rates. However, this is not the case in today’s real estate market. The supply isn’t keeping up with the demand. As a result, experts are still predicting housing prices to rise over time, despite the brief dip we have witnessed in the market over the last few months.

Outsider.com