Contract signings for U.S. home purchases experienced a significant decline in April, marking the largest drop in three years, according to the National Association of Realtors (NAR). The overall level of activity in the housing market reached its lowest point since the onset of the COVID-19 pandemic in the spring of 2020. The NAR's pending home sales index fell by 7.7% in April to a reading of 72.3, compared to an upwardly revised reading of 78.3 in March. This drop is the most substantial since February 2021, and the index level is now at its lowest since April 2020's record-low reading of 71.8. The index is considered predictive of completed home sales transactions one to two months later.

Lawrence Yun, the chief economist at the NAR, attributed the decline in home buying activity to escalating interest rates throughout April, despite an increase in available inventory in the market. However, Yun expressed optimism about future conditions, anticipating that the Federal Reserve's anticipated rate cut later in the year would lead to improved affordability and increased supply in the housing market.

The Federal Reserve has implemented interest rate hikes totaling 5.25 percentage points since March 2020 in an effort to combat inflation. Although rates have remained unchanged since July of the previous year, initial expectations for as many as three quarter-percentage-point rate cuts in the current year have been adjusted due to higher-than-expected inflation levels at the beginning of the year. Bond market pricing currently suggests the likelihood of no more than two rate cuts for the remainder of the year.