Home shoppers signed 1.5% fewer contracts to buy existing homes in April compared with March, according to the National Association of Realtors' Pending Home Sales Index. Sales were 2% lower compared with April 2018, the 16th straight month of annual declines.
Pending sales are an indicator of future closings and are therefore the most timely measure of activity in home sales. The expectation had been for a small monthly gain after a large increase in March.
"Though the latest monthly figure shows a mild decline in contract signings, mortgage applications and consumer confidence have been steadily rising," said Lawrence Yun, chief economist of the NAR. "It's inevitable for sales to turn higher in a few months."
Buyers this spring have had the benefit of lower mortgage rates. The average rate on the 30-year fixed soared above 5% last November, but sank closer to 4% in March and then held steady right around 4.3% for most of April, when these contracts were signed.
Buyers are also seeing home prices cool, which carries both negative and positive implications for the market. Prices are still higher than they were a year ago, but the gains have been shrinking with each month. While that helps with affordability, it also fuels fears that, in some markets, a home bought today will actually fall in value over the coming year.
This is especially true in overheated markets like Seattle, Denver, Los Angeles and San Francisco, where the supply of homes for sale is rising.
"Home price appreciation has been the strongest on the lower-end as inventory conditions have been consistently tight on homes priced under $250,000. Price conditions are soft on the upper-end, especially in high tax states like Connecticut, New York and Illinois," said Yun.
New tax laws have limited the deduction homeowners can take for property taxes. That has hit housing markets in higher tax states disproportionately.
As a comparison, there is just a 3.3-month supply of homes for sale priced under $250,000 nationally, but an 8.9-month supply of homes priced $1 million and above.
Regionally, the Realtors' pending home sales index in the Northeast declined 1.8% monthly and was 2.1% below a year ago. In the Midwest, the index rose 1.3% monthly but was 2.4% lower annually. In the South it fell 2.5% monthly and 1.8% annually. In the West it dropped 1.8% monthly and was 1.5% below a year ago.