With mortgage interest rates rising, this February the number of Americans signing home purchase contracts fell to its lowest since October, 2011, said the National Association of Realtors.
The National Association of Realtors’ seasonally-adjusted pending sales index fell 10.5% in the year to February, the eighth consecutive month of decline. The index measures contracts signed to purchase homes. Contracts usually take from a few weeks to two months to close.
The drop is attributed to a lack of inventory, rising house prices and the increase of one percentage point in interest rates over the past year. The average 30-year fixed-interest mortgage rate was between 4.23% and 4.37% in February, having gradually risen since May last year. The harsh winter may have also impacted pending sales.
“Unusually disruptive weather across large stretches of the country in December forced people indoors and prevented some buyers from looking at homes and making offers...Rising home prices are also giving pause to some potential buyers, while at the same a lack of inventory means insufficient choice,” said Lawrence Yun, chief economist for the National Association of Realtors.
About 5 million previously-owned homes will be sold in 2014, slightly lower from the previous year, according to the National Association of Realtors. About 5.1 million previously-owned homes were sold in 2013.
Sales of new homes dropped by 3.3% in February compared to the previous month, according to the Commerce Department. Loan applications for housing purchases also fell in February.
New federal rules enforced last month likely had an impact. The rules discourage mortgage lenders approving loans to people whose monthly debt repayments exceed 43% of monthly gross income, thus rendering many young adults unable to qualify for a mortgage.