In a grim sign for the housing market’s busiest season, pending home sales, which measure signed contracts on existing homes, fell 4.1% in February compared with January, according to the National Association of Realtors.

Sales were down 5.4% compared with February 2021. Analysts had expected only a small increase. The fourth consecutive month has seen a decline in pending sales. These are indicators of future closes one to two months ahead.

The market’s reaction to new rates is evident in this indicator, particularly as the spring season approaches. This count relies on the signed contracts that were made back in February.

The rates rose sharply from January to February, with the average rate rising by 1%. Today’s average fixed 30-year rate for a mortgage on a 30 year term is over 1% higher than the one-year ago.

In the Northeast, sales pending rose by 1.9% from month to month but fell 9.2% compared to a year earlier. Sales in the Midwest decreased by 6.0% and fell 5.2% from February 2021. The South saw sales fall 4.4% monthly, 4.3% annually, while in the West, they fell 5.4% and 5.3% respectively from last year.

As spring has been historically the most busy season in the housing market, the timing of the rise in mortgage rates couldn’t have come at a better time.

Paul Legere, an agent for Joel Nelson Group, said that most buyers have adjusted their targets to purchase the property they are capable of affording at higher interest rates. Buyers are choosing to not rent in my area.

The market is extremely competitive today for potential buyers. Today, a median monthly mortgage payment is now taking up much more income than the average consumer. According to the Mortgage Bankers Association’s new index, it rose 8.3% over January. This is almost 22% more than in February 2021. This is almost 10% more than the monthly payment for those who are at the lower end.

The 30-year fixed rate mortgage jumped 73 basis points between December 2021 and February 2022. In February, the median principal and interest payments for a mortgage applicant rose $127 over January, and 337 in comparison to one year ago, according to Edward Seiler (MBA’s Associate Vice President of Housing Economics).

The market is still very tight. They now need to consider inflation when planning their budgets. According to Realtor.com, the list prices of homes have accelerated again after a short reprieve in fall last year.

George Ratiu senior economist, Realtor.com, stated that “as we move into spring season, the markets remain clearly tilted toward sellers’ favor”. However, mortgage rates are moving towards 5% and we’re seeing signs that there is a change in the housing fundamentals. Many people who want to buy a house have reached a limit on how much they can afford.