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For the first time since November 2022, pending home sales decreased in March, according to the National Association of Realtors (NAR). The South posted a monthly gain, while all four U.S. regions saw year-over-year transactions decrease.

The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, fell 5.2% to 78.9 in March, and year-over-year pending transactions dropped 23.2%. A PHSI reading of 100 is equal to the level of contract activity in 2001, NAR notes.

"The lack of housing inventory is a major constraint to rising sales," says NAR chief economist Lawrence Yun. "Multiple offers are still occurring on about a third of all listings, and 28% of homes are selling above list price. Limited housing supply is simply not meeting demand nationally."

The Northeast index fell 8.1% from last month to 66.6, a drop of 24.3% from March 2022. The Midwest PHSI dropped 10.7% to 75.7 in March, down 21.5% from one year ago.

The South PHSI rose 0.2% to 99.6 in March, down 19.8% from one year ago. In the West, the index decreased 8% in March to 59.4, falling 32.2% from March 2022.

"Sales in the second half of the year should be notably better than the first half as job gains continue and more favorable mortgage rates are expected," says Yun. "Sales of new homes are already matching 2019 pre-COVID activity and are expected to increase in 2023, largely due to plentiful inventory in this segment of the market."

The association forecasts that the economy will slowly continue adding jobs and mortgage rates will drop, with the 30-year fixed mortgage rate gradually falling to 6% this year and to 5.6% in 2024. Housing starts will fall from last year by 7.3% in 2023 to 1.44 million and then increase 6.9% in 2024 to 1.54 million, NAR predicts.

NAR expects existing-home sales will steadily improve in the coming months but will still come up short on an annual figure. Existing-home sales are predicted to drop from the previous year by 9.3% in 2023 to 4.56 million before increasing by 15.4% in 2024 to 5.26 million.

Newly constructed home sales will increase from last year by 4.5% in 2023 to 670,000, due to more plentiful inventory in this segment of the market, and increase by another 11.9% in 2024 to 750,000, NAR forecasts.

Compared with 2022, NAR says that median existing-home prices will mostly stabilize, predicting the national median existing-home price decreasing by 1.8% in 2023 to $379,600 and then improving by 2.8% in 2024 to $390,000. The West is expected to see lower prices, but the Midwest will likely see a positive gain. According to NAR, the median new-home price will be lower by 1.9% in 2023 to $449,100, followed by an improvement of 4.2% in 2024 to $468,000.