Mortgage rates are still high and affordability is still ugly. Yet for the third month in a row, more buyers are signing contracts to buy homes.
The National Association of Realtors said pending home sales rose 1.4% in April, after an upwardly revised 1.7% gain in March. That's the longest run of housing momentum the market has seen in a while.
Pending home sales count purchase contracts before they close, which makes them a leading sign (an early read on where housing is going). Three straight months of growth is the kind of pattern economists watch, not fade.
The April number beat economist forecasts of about 1%, with contract signings running 3.2% ahead of last spring. Regional gains were uneven, with the Northeast leading at a 6.6% jump, the Midwest at 3.0%, and the West adding 0.4%.
The South was the soft spot in the report, even as the rest of the country picked up. That gap is worth watching since the South has been the fastest-growing housing region for years, with builders pouring money into Florida, Texas, and the Carolinas.
The new normal of higher rates is starting to feel less new. Many buyers have stopped waiting for cheaper money and are moving anyway.
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NAR Chief Economist Lawrence Yun said buyers "are coming out with cautious optimism despite increasing economic uncertainty and a slight rise in mortgage rates." That's a quiet way of saying buyers are tired of waiting.
Many have been on the sidelines for two years hoping for lower rates or lower prices. Some are now accepting the new normal and moving anyway.
Yun also flagged a problem. "Unless supply meaningfully increases, home price growth could outpace wage growth and further erode the homeownership rate," he said.
In plain English: demand is back, but the supply problem hasn't been solved. The April existing-home sales report, released last week, showed sales rose just 0.2% with a median price of $417,800 and 4.4 months of inventory.
The next pending sales report lands June 17, and three months of growth is already a trend. Four would make it harder to ignore.
A separate Redfin report showed pending sales rose 9.6% year over year in the four weeks ending May 10, the highest level since September 2022. That points to even more pent-up demand than the NAR data suggests, especially as homebuilders pump out new inventory in the Sun Belt.
The Fed, builders, and homebuilder stocks are all watching the same chart. Lennar, DR Horton, and Pulte have all leaned harder into rate buydowns and starter homes to keep buyers moving, and those bets only work if the demand keeps showing up.
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