Pending home sales in the United States have plummeted to their lowest levels since President Joe Biden took office, driven by a combination of housing scarcity and high interest rates. This significant decline was highlighted in a recent report from the National Association of Realtors (NAR).

The Pending Home Sales Index (PHSI), a key indicator of housing market activity, fell by 4% in April, marking the sixth consecutive month of decline. This drop brought the index to 76.5, its lowest reading since the early days of the Biden administration. Compared to the same period last year, pending home sales are down by 20.3%.

NAR Chief Economist Lawrence Yun attributed the decline to the ongoing scarcity of available homes and the elevated mortgage rates. “The lack of housing inventory and high mortgage rates are limiting the choices for potential buyers,” Yun stated. “Affordability challenges are hurting demand, especially among first-time buyers.”

The Federal Reserve’s series of interest rate hikes, aimed at curbing inflation, have pushed mortgage rates to levels not seen in over a decade. As of now, the average rate on a 30-year fixed mortgage stands at around 7%, significantly higher than the sub-3% rates seen in late 2020 and early 2021.

This spike in borrowing costs has compounded the affordability crisis, making it harder for buyers to qualify for loans and increasing monthly mortgage payments. The combination of high rates and low inventory has also deterred many potential sellers from listing their homes, further exacerbating the supply shortage.

Regional variations in the housing market are also evident. The West saw the steepest decline in pending home sales, dropping by 11.3% in April. The South and Midwest experienced more modest decreases of 3.3% and 0.5%, respectively, while the Northeast saw a slight increase of 4.3%.

Despite the current challenges, Yun expressed cautious optimism for the future. He noted that as inflation pressures ease and the Fed potentially slows its rate hikes, mortgage rates could stabilize, leading to a gradual improvement in the housing market.

However, the immediate outlook remains bleak. Prospective buyers are likely to continue facing a tough market, characterized by limited choices and high costs. Policymakers and industry stakeholders will need to address these fundamental issues to ensure a more balanced and accessible housing market in the long term.