Pending home sales fell 6.3% in April, with all four regions of the U.S. registering fewer month-over-month transactions as mortgage rates increased, according to the National Association of Realtors (NAR).

NAR’s pending home sales index is a forward-looking indicator of home sales based on contract signings. An index level of 100 is equal to the level of contract activity in 2001. The index declined 6.3% in April, registering a reading of 71.3. Year-over-year pending transactions declined by 2.5%.  

April contract signings in the Midwest were down 5% from the previous month, but up 2.2% year over year. Month-over month pending sales fell in the Northeast by 0.6% and were down 3% from one year ago.  

The South saw a 7.7% drop in pending sales in April and a 3% decline from the previous year. The West experienced the largest decline, falling 8.9% from the previous month and 6.5% from April 2024.  

“At this critical stage of the housing market, it is all about mortgage rates,” NAR Chief Economist Lawrence Yun said in a statement. “Despite an increase in housing inventory, we are not seeing higher home sales. Lower mortgage rates are essential to bring homebuyers back into the housing market.”

As for housing affordability issues, Yun said that homebuyers have a better chance to purchase homes in affordable regions such as the Midwest, where the typical home price is $313,000, about 25% below the national median home price. Also, with housing inventory levels across the country reaching five-year highs, homebuyers are in a better position to negotiate more favorable terms.

The dramatic decrease in pending sales surprised the market, which had forecasted pending home sales to be flat month over month.

“Pending home sales in April took a nosedive, marking the steepest month-over-month drop since September 2022, as rising mortgage rates dampened consumer buying power in April,” First American Deputy Chief Economist Odeta Kushi said in a statement. “Adding to the woes, economic uncertainty continues to keep potential buyers on the sidelines. The pending home sales data continues to point to a frozen housing market, with transaction activity bouncing along the bottom.”