U.S. pending-home sales down -4.1% MoM, were expected to increase +1%. Pending home sales are forward-looking indicator of home sales based on contract signings. This is the fourth straight month of declines. What's holding back sales? 
Lack of inventory and growing affordability challenges. Inventory turnover, the supply of homes for sale nationwide as a percentage of occupied residential inventory was at a historic low in February. You can't buy what's not for sale, even if you can afford it.
If we hold income constant at its Feb 2021 level, the 95 basis point increase in rates from Feb. 2021-Feb.2022 resulted in a ~$53,000 decline in house-buying power. Some buyers are being priced out of a housing market experiencing double-digit house price growth & rising rates.
The market remains tilted in favor of sellers as we enter the busiest time of the year for the housing market. Not enough supply relative to demand will keep house price growth positive, but not at the record-breaking pace we saw in 2021.
My other concern when it comes to rising rates is the impact to inventory. The majority of inventory is existing-home inventory & existing homeowners are staying put. Avg tenure length in the US is over 10 years & rising rates will further discourage existing owners from moving.
Context is key. We're seeing some softening in the market, as expected with limited inventory, double-digit house price growth & rising rates. But, while purchase demand is below 2020 &2021 levels, it's still above 2019 levels, which was our strongest year in a decade.
If you're curious about tenure length by market (CBSA), here's the data for January 2022. Highest tenure length in major CA markets- nearly 16 years in San Jose!
Here's what I mean when I say that existing-home inventory makes up the majority of total inventory. Historically nearly 90%, but recently more like 70%.
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