US pending home sales beat expectations in March

WASHINGTON, April 21 (Reuters) - Contracts ‌to purchase ​previously ​owned U.S. homes increased more than expected in March, but higher mortgage rates and tight inventory remained constraints ‌for the housing market.

The pending home sales index rose ⁠1.5% last month to 73.7, the National Association of Realtors said on Tuesday. ‌Economists polled by Reuters had ‌forecast contracts, which become sales after a month or two, increasing 0.5%.

Contracts rose in the Northeast and the densely populated ​South regions. They fell in the West and Midwest regions. Pending home sales dropped 1.1% from a year earlier.

Mortgage rates ⁠increased through March as the U.S.-Israel war sent oil prices soaring. Mortgage rates track U.S. ​Treasury yields, which have risen as the Middle East conflict stoked inflation fears.

The popular 30-year fixed mortgage ​rate averaged 6.38% at the end ‌of March, data from mortgage finance agency Freddie Mac showed. It had averaged 5.98% at the end ⁠of February, just before the war started, as Freddie Mac and Fannie Mae expanded purchases of mortgage-backed securities.

"Demand sensitivity to mortgage rates is ⁠greatest among first-time buyers, particularly younger buyers," said Lawrence Yun, the NAR's chief ​economist. "As a result, boosting supply and new-home construction should focus on smaller, more affordable homes."

The NAR reported last week that existing home sales fell to ‌a nine-month low in March. Housing affordability has become an increasingly potent political issue ahead of ‌the November midterm elections.

A survey last week showed homebuilder sentiment plummeted ⁠to a seven-month low in ‌April, noting that "energy costs ​make up approximately 4% of residential construction material input and service costs."

(Reporting by Lucia Mutikani; Editing by ‌Chizu Nomiyama)

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