US pending home sales rise 1.5% despite higher mortgage rates

U.S. pending home sales climbed 1.5% in March, defying forecasts for a flat reading as pent-up demand from buyers temporarily overshadowed the impact of rising mortgage rates and geopolitical tensions stemming from the Iran conflict.

"The increase in contract signings, despite higher mortgage rates, reflects the market's pent-up housing demand that is still not being met," National Association of Realtors® (NAR) Chief Economist Lawrence Yun said in a statement. He noted that a greater supply of inventory will be crucial to translate that demand into closed sales.

The monthly gain represents a slowdown from February's 2.5% increase and leaves contract signings down 1.1% compared to March 2025. The market showed significant regional divergence, with the Northeast and South posting monthly gains of 4.4% and 3.9% respectively, while the Midwest and West saw declines of 1.3% and 2.6%.

The data suggests a housing market at a crossroads. Improving inventory levels are offering a window for determined buyers, even as mortgage rates—which climbed from around 6.11% to 6.38% through March—are expected to remain elevated. This poses a significant hurdle for affordability, particularly for the younger, first-time buyers who are most sensitive to interest rate fluctuations.

South Leads Regional Growth

The Southern housing market was the primary engine of growth, being the only region to post a year-over-year gain in contract signings, which rose 2.3% from March 2025. "A good number of markets in the South experienced price cuts over the past year but recorded the strongest job growth," Yun said. "That combination should lead to stronger housing market activity in the South this year.”

In contrast, other regions are still finding their footing. The spring market in many mountain-resort towns has been sluggish, hampered by a winter with lower-than-average tourism and rising economic uncertainty. While some local metro areas like Kansas City and Milwaukee are seeing double-digit annual jumps in pending sales, the broader trend is one of cautious recovery.

Supply Improves, But Affordability Remains a Hurdle

On the supply side, conditions continued to improve for buyers. New listings surged 21.2% from February, according to a Realtor.com report, offering the freshest inventory in years. The national median list price also fell 2.2% year-over-year, marking the fifth consecutive month of annual declines and giving buyers more negotiating power than they had in 2025.

However, the affordability crisis remains a dominant theme, creating a sharp generational divide. First-time buyers accounted for just 21% of all home purchasers last year, a record low since the NAR began tracking the data in 1981. Meanwhile, Baby Boomers now buy and sell more homes than any other generation, owning nearly twice as many homes with three or more bedrooms as millennial families with children.

"The housing market remains sharply divided between homeowners with equity and first-time buyers trying to break in, many of whom are younger Millennials," said NAR Deputy Chief Economist Jessica Lautz. For this younger cohort, soaring prices, student loan debt, and high child care costs remain significant barriers to entry. To truly unlock the market, Yun suggests, new construction must focus on smaller, more affordable starter homes.

This article is for informational purposes only and does not constitute investment advice.