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Pending home sales declined in February, marking the fourth consecutive month of transaction decreases, according to the National Association of Realtors (NAR). The Pending Home Sales Index (PHSI) decreased 4.1% to 104.9 in February, and transactions decreased 5.4% on a year-over-year basis. An index of 100 is equal to the level of contract activity in 2001.

“Pending transactions diminished in February mainly due to the low number of homes for sale,” says Lawrence Yun, NAR’s chief economist. “Buyer demand is still intense, but it’s as simple as ‘one cannot buy what is not for sale.’”

In addition to climbing home prices, Yun says potential buyers must also grapple with rising mortgage rates. Many shoppers will likely want to lock in before rates increase further. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 4.42% in the week ending March 24, up from 4.16% for the previous week. Yun forecasts mortgage rates to be about 4.5% to 5% for the remainder of the year and expects about a 7% reduction in home sales in 2022 compared with 2021.

“It is still an extremely competitive market, but fast-changing conditions regarding affordability are ahead,” says Yun. Consequently, home sellers cannot simply bump up prices in the upcoming months, but need to assess the changing market conditions to attract buyers.”

As of February, higher mortgage rates and sustained price appreciation has led to a year-over-year increase of 28% in mortgage payments, according to the NAR. Yun says home price surges coupled with rising mortgage rates “can easily translate” to an additional $200 to $300 in mortgage payments per month, a major strain for many families on an already tight budget.

Of the four major U.S. regions, only the Northeast reported a month-over-month increase in contract signings. All four regions registered a decline on a year-over-year basis.

Month-over-month, the Northeast PHSI increased 1.9% in February but fell 9.2% on a year-over-year basis. In the Midwest, the index decreased 6% compared with the previous month and decreased 5.2% compared with February 2021.

Pending home sales transactions in the South declined 4.4% compared with January and declined 4.3% compared with February 2021. The February index in the West slid 5.4% on a month-over-month basis and decreased 5.3% on a year-over-year basis.

Of the 40 largest metros in the U.S., the most improved markets over the past year were Orlando-Kissimmee-Sanford, Florida; Miami-Fort Lauderdale, Florida; Nashville-Davidson, Tennessee; Indianapolis, Indiana; and San Diego-Carlsbad, California.