(Kitco News) - Hopes for a stabilizing U.S. housing market were dealt a severe blow after the number of potential home buyers collapsed in April, according to the latest data from the National Association of Realtors (NAR).
The U.S. pending home sales index dropped 7.7% in April, the NAR announced Thursday, after March’s upwardly revised 3.6% rise. The data was much worse than forecasts, as economists were expecting to see only a 0.6% decline.
For the year, pending home sales fell -7.4% against expectations for a 0.5% increase, and after moving into positive territory with a 0.1% print in March. All four U.S. regions registered month-over-month and year-over-year declines.
“The impact of escalating interest rates throughout April dampened home buying, even with more inventory in the market,” said NAR Chief Economist Lawrence Yun. “But the Federal Reserve's anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply.”
The worse-than-expected housing market data pushed the gold market to fresh session highs on Thursday, with spot gold topping out at $2,350.91 in the minutes following the release, and last trading at $2,348.57 per ounce, up 0.44% on the day.
“Home prices are hitting record highs, but the pace of gains should decelerate with more supply," Yun added. “However, the prospect of measurable home price declines appears minimal. The few markets experiencing price declines will be viewed as second-chance opportunities for buyers to enter the market if those regions continue to add jobs.”
Economists pay close attention to pending home sales because the report is a leading indicator of existing home sales given that contracts are signed a few months before homes are actually sold.
The U.S. housing market has been trying to stabilize after seeing significant weakness through most of 2023 and early 2024. Many potential home buyers have been priced out of the market due to rising prices and higher mortgage rates.
The Federal Reserve’s restrictive monetary policy stance through the first months of 2024 has continued to support higher mortgage rates.
