Pending home sales declined in February for the fourth month in a row, as would-be buyers grapple with fewer, pricier homes to choose from and rising interest rates. Contract signings dropped by 4.1% last month from January and were down 5.4% year over year with all four regions in the U.S. seeing a decline, according to the latest data from the National Association of Realtors. "Pending transactions diminished in February mainly due to the low number of homes for sale," said Lawrence Yun, NAR's chief economist. "Buyer demand is still intense, but it's as simple as 'one cannot buy what is not for sale.'" Yun anticipates a 7% decline in home sales this year compared to last, and forecasts that rates will hover around 4.5% to 5% for the remainder of 2022. "It is still an extremely competitive market, but fast-changing conditions regarding affordability are ahead," he said. "Consequently, home sellers cannot simply bump up prices in the upcoming months, but need to assess the changing market conditions to attract buyers."
In recent days, investment bank after investment bank has published revised forecasts, and they all predict the same thing: That the Federal Reserve will raise interest rates at a quicker pace this year than anybody would have anticipated just a week ago. The latest is from Goldman Sachs, which now sees five rate hikes this year, joining Deutsche Bank at that number. Bank of America thinks the central bank will be even more aggressive. It predicts seven 25-basis-point hikes this year, one for each of the remaining FOMC meetings. That would bring the federal funds rate to 1.75%-2% by year-end, essentially hiking up borrowing costs for Americans after years of rock-bottom lending rates. At last week's meeting, Fed Chairman Jerome Powell gave a clear signal that the central bank will move to raise interest rates as often as needed to tame run-away inflation. "The striking thing about Chair Powell's press conference this week was that he in effect made a compelling case that the Fed should have already hiked rates in the second half of last year," said Ethan Harris, global economist at Bank of America, in noting tell-tale signs of a slowing economy, a turbulent labor market and rising prices. "The only thing missing from the narrative was: 'and so, we are behind the curve and are hiking today.'"