The numbers: An index of pending U.S. home sales slumped 3.9% in April and fell for the sixth month in a row, signaling a sharp slowdown in the real estate market due to record home prices and rising mortgage rates.
The index reflects transactions in which a contract has been signed for the purchase of a previously owned home, but the sale has not yet closed.
Economists view the index as a bellwether for future home sales. The report is published by the National Association of Realtors.
Key details: Pending home sales fell last month in all major regions except for the Midwest.
Sales were down in all four regions compared to a year earlier. Year over year transactions were off 9.1%.
The big picture: High prices and escalating mortgage rates have made homes less affordable. Lawrence Yun, NAR’s chief economist, said higher rates have added as much as $500 a month to the cost of some mortgages.
Sales are expected to continue to slow even though demand for housing is still quite strong.
Homeowners with low mortgage rates, what’s more, may be less inclined to sell since they would have to buy another property at sharply higher interest rates.
Looking ahead: The recent housing boom is stalling and could even be coming to an end unless prices come down sharply.
“The latest contract signings mark six consecutive months of declines and are at the slowest pace in nearly a decade,” Yun said.
The loss of momentum in the housing market would deprive the U.S. economy of one of its strongest growth contributors in the past few years. New owners also need to buy lots of furnishings for their new homes.
Market Reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
surged again in Thursday trades.
U.S. Stocks rose
SPX,
on Wednesday after the Fed minutes from its early May meeting suggested the central bank might not raise interest rates quite as rapidly as Wall Street had expected.