Pending home sales post strong gain in March but lag behind 2024 pace

Recent data hasn’t provided much optimism about the direction of the housing market, but one report suggests better conditions are on the way.

The March reading of the Pending Home Sales Index (PHSI) from the National Association of Realtors (NAR) clocked in at 76.5, a 6.1% rise compared to February. An index reading of 100 is equal to contract levels in 2001.

It’s the largest monthly increase since December 2023 and was largely buoyed by relatively lower mortgage rates in March, which averaged 6.65%, according to NAR. But it’s a decline of 0.6% year over year, suggesting that market conditions remain subdued. 

“Although pending home sales are slightly down compared with last year, the month-over-month bounce is a step in the right direction,” First American deputy chief economist Odeta Kushi said in a statement. “Despite this cautious optimism, the recent increase in rates and ongoing economic uncertainty may temper this momentum.”

The monthly rise in the index was driven by a 9.8% jump in the South, which had previously been slumping. Pending sales activity in the West (+4.8%) and Midwest (+4.9%) also rose compared to February, while the Northeast saw a decrease of 0.5%.

Similar to the national index, every region but the Midwest fell year over year, with the Northeast (-3%) down the most.

The glimmer of hope in the PHSI follows dismal existing-home sales in March, which fell 2.4% year over year. That decline was also driven by the South, where sales dropped by 4.2%. But new-home sales in March came in surprisingly positive, rising 6% compared to a year ago.

Pending home sales can foreshadow what’s to come in the market, as they tend to precede final sales numbers by a month or two. But data that’s more immediate indicates that there are still bumps ahead.

The Mortgage Purchase Applications Index from the Mortgage Bankers Association (MBA) registered a weekly drop of 4.2%, a decline that followed the previous week’s 12.7% pullback. In addition to that weak signal, consumer confidence is down by a shocking 32% relative to January.

It’s no secret what’s behind this. President Donald Trump’s trade war has shaken perceptions of the economy, as his April 2 announcement of a new global tariff regime pushed markets into free fall. Inflation expectations jumped, and consumers appear to be pulling back on spending.

If this extends to the housing market, the 2025 spring homebuying season might be even more of a letdown than it was last year. But it will likely take until the summer before the full extent of the trade war is clear.

“Buyers are still afflicted with mortgage rates in the high-6% range and consumer confidence is shaken by the trade war that’s roiling markets and leading would-be homebuyers to fear for their jobs,” Realtor.com senior economist Joel Berner said in a statement.

“Though the employment numbers in March did not show much cause for concern, American consumers are closely attuned to the grim economic news and water cooler chat around them, which may be affecting their decisions about when or if to buy a home.”