Pending home sales for the month of April plummeted 9.2% compared to April 2013, the National Association of Realtors reported Thursday.
Contracts signed to buy existing homes increased 0.4% in April compared to March 2014, but that’s coming off three months of flat sales blamed on cold weather.
The expectation had been for at least a 2% gain month-over-month.
Optimistic economists expected that there was a swathe of pent-up demand that would flood the market at the start of the spring buying season. That didn’t happen.
“Higher inventory levels are giving buyers more choices, and a slight decline in mortgage interest rates this spring is raising prospective homebuyers’ confidence,” said Lawrence Yun, chief economist for the NAR. “An uptrend in closed sales is expected, although some months will encounter a modest setback.”
Sales have arrested despite mortgage rates now being at a near nine-month low after five straight weeks of steady declines. The 30-year fixed rate mortgage this week was 4.12%. Even refinancings have dropped to 37% of all mortgage activity, meaning borrowers are staying away despite historic lows.
Which means it could get worse, as Yun projects the 30-year fixed-rate mortgage to trend up and average 5.5% next year.
“The extent to which higher mortgage interest rates will impact housing affordability and sales depends on income growth, ongoing improvement in the labor market and any change to mortgage underwriting conditions,” he said.
This comes as the economy is looking at more bad news.
The nation’s domestic economic output for the first quarter was revised downward Thursday, posting a contraction of -1.0% from a meager positive 0.1% initially reported.