Pending home sales slipped in February, marking four consecutive months of transaction decreases, according to the National Association of Realtors. Three of the four major U.S. regions saw contract signings fall month-over-month, with the Northeast being the only area that reported an increase. All four regions registered a decline in year-over-year contract activity.

The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, waned 4.1% to 104.9 in February. Year-over-year, transactions dropped 5.4%. An index of 100 is equal to the level of contract activity in 2001.

"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.'"

Along with climbing home prices, Yun added that now buyers must grapple with rising mortgage rates and noted that shoppers will likely want to lock in before rates increase further.

"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."

As of February 2022, higher mortgage rates and sustained price appreciation has led to a year-over-year increase of 28% in mortgage payments.

"The surge in home prices combined with rising mortgage rates can easily translate to another $200 to $300 in mortgage payments per month, which is a major strain for many families already on tight budgets."

Yun forecasts mortgage rates to be about 4.5% to 5% for the remainder of the year and expects about a 7% reduction in home sales in 2022 compared to 2021.

"Home prices themselves are still on solid ground," he added. "They may rise around 5% by year's end and we should see much softer gains in the second half of the year."

Realtor.com's Hottest Housing Markets data in February showed that of the largest 40 metros, the most improved markets over the past year were Orlando-Kissimmee-Sanford, Florida; Miami-Ft. Lauderdale, Florida; Nashville-Davidson, Tennessee; Indianapolis, Indiana; and San Diego-Carlsbad, California.

February Pending Home Sales Regional Breakdown

Month-over-month, the Northeast PHSI rose 1.9% to 85.0 in February, a 9.2% drop from a year ago. In the Midwest, the index decreased 6.0% to 99.7 last month, down 5.2% from February 2021.

Pending home sales transactions in the South declined 4.4% to an index of 127.2 in February, down 4.3% from February 2021. The index in the West slid 5.4% in February to 90.0, down 5.3% from a year prior.