A dip in mortgage rates pulled some homebuyers off the sidelines in March, leading to an unexpectedly large jump in pending home sales as measured by the National Association of REALTORS’® Pending Home Sales Index.   

Specifically, the index rose 6.9% month over month in March, compared to economists’ expectations of a smaller 1% gain. Year over year, the index was down 0.6%.   

“Home buyers are acutely sensitive to even minor fluctuations in mortgage rates,” NAR Chief Economist Lawrence Yun said. “While contract signings are not a guarantee of eventual closings, the solid rise in pending home sales implies a sizable build-up of potential home buyers, fueled by ongoing job growth.”  

Mortgage rates slid about 20 to 30 basis points in March compared to January and February, averaging 6.65% compared to 6.96% and 6.84%, respectively. 

“Higher inventory levels also offered buyers more choices,” First American Deputy Chief Economist Odeta Kushi said. “Although pending home sales are slightly down compared with last year, the month-over-month bounce is a step in the right direction.” 

Pending sales, in which the contract has been signed but the transaction has not closed, are considered a leading indicator and generally precede existing-home sales by a month or two.