US pending home sales fell by 7.7% in April, a considerable outlier when the National Association of Realtors (NAR) was only forecasting a drop off of 1.0% month-over-month. The Morning Brief team explains the massive headwind mortgage rates are having on homebuyer activity, providing comments from NAR Chief Economist Lawrence Yun.

Read more about April's housing costs here.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Luke Carberry Mogan.

Video Transcript

Latest reading on the housing market, April pending home sales, they declined 7.7% compared to a month ago.

That was well below what the street had forecast when you divide it up into the regions.

Some of the trends that we are seeing there, all four of the US regions registering month, over month and year, over year declines in pending home sales and put this into context here for the viewers.

And just the extent of that decline was actually of the biggest drop that we are the lowest pending home sales index level.

Excuse me in four years, the largest monthly percentage decline that we've seen since February of 2021 and obviously pending home sales really used as a leading indicator just in terms of the sales activity that we'll likely see here in the coming weeks and months.

Yeah, this is a remarkable miss here and we've got a quote here from the Nrnar Chief economist Lawrence Yun, good friend of the show.

By the way, the impact of escalating interest rates throughout April dampened home buying even with more inventory in the market.

He said also continuing and going on to say, but the Federal Reserve's anticipated interest rate cut later this year should lead to better conditions with improved affordability and more supply.

It just goes to show how many are still waiting in the wings, waiting on the sidelines to enter into this potential home buying market as well.

We do see the fed cut rates.

It's also interesting as we continue to evaluate and take a look at the 30 year which as of last week slipped below 7% here.

And the larger thinking about how many buyers would still have the propensity to come in at this market and then bank on refinancing later on as well.

So that is one of the other considerations at play within this market right now.

What rates really need to get to in order to get those incentive divide existing homeowners right now, Canal Islands and to list their homes because what is it?

75 80% of those with mortgages right now have a mortgage of right around 5% below 5%.

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So when you take a look at that gap, many people that aren't willing to sell even though we have seen mortgage rates here fall below 7% across every region.

All regions of the US registering month over month and year, over year decreases.

The Midwest and of the West experiencing the largest monthly declines here.