The National Association of Realtors released its Pending Home Sales report and it showed signed contracts in the month of February 2022 were down across all regions of the U.S. except the Northeast. Sales were weaker than expected and are now down 5.4% year over year. Without a doubt, higher interest rates could be impacting demand, but it really boils down to inventory. There were only 870,000 homes for sale last month across the U.S. This is down 16% from last year and 34% from July. Simply put, if there were more homes for sale there would be more sales.
Speaking of more homes, it is worth mentioning that inventory levels are nowhere near the levels of 2007. Back in 2007, there were about 3.7 million available homes for sale. At the current level of 870,000 homes, it is clear that there is an inventory shortage. The other side of the coin, demand is at record levels. The average time homes were listed on the market dropped from 19 days to 18 days!
Low levels of inventory and very high levels of demand are very supportive of home pricing. This also shows that housing is in a different environment, and not in bubble territory. This further displays the resiliency of the housing market and strength of home pricing.