(Kitco News) - The U.S. housing market continues to face major headwinds as fewer consumers are even starting the process of buying a new home, according to the latest data from the National Association of Realtors (NAR).
The U.S. Pending Home Sales Index dropped 6.3% in April to 71.3, down from March’s downwardly revised increase of 5.5%. The data was significantly weaker than forecasts, as economists had expected only a 0.9% decline.
The NAR said that the housing market continues to experience broad-based weakness, with transactions in all four U.S. regions showing month-over-month losses.
The disappointing housing market data has had little impact on gold, as prices continue to hold support above $3,300. The precious metal continues to benefit from ongoing economic uncertainty. Spot gold last traded at $3,315.60 an ounce, up 0.83% on the day.
Although gold is not reacting to the latest housing data, the environment remains extremely bullish for the precious metal. NAR Chief Economist Lawrence Yun said that for the housing market to recover, interest rates need to decline.
“At this critical stage of the housing market, it is all about mortgage rates," said Yun. "Despite an increase in housing inventory, we are not seeing higher home sales. Lower mortgage rates are essential to bring homebuyers back into the housing market."
The Federal Reserve has been explicit in its neutral monetary policy stance, stating that it is in no hurry to cut interest rates, as inflation risks remain elevated and the labor market remains relatively healthy. Its stance is not expected to change anytime soon.
Despite growing concerns about a slowing economy, markets do not expect the Federal Reserve to start cutting interest rates until September. The CME FedWatch Tool shows interest rates holding steady following both the June and July monetary policy meetings.
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.
In some good news, Yun noted that growing housing inventories are starting to impact prices, even as mortgage rates remain elevated.
"Home buyers have a better chance to purchase homes in affordable regions such as the Midwest, where the typical home price is $313,000 – 25% below the national median home price," added Yun. "Moreover, with housing inventory levels reaching five-year highs, home buyers in nearly every region of the country are in a better position to negotiate more favorable terms."
