Pending home sales grew 0.8% in February, the third straight monthly increase, according to the latest data from the National Association of REALTORS® (NAR).
NAR’s Pending Home Sales Index for February registered at 83.2, reflecting a good level of activity (an index of 100 is equal to the 5 to 5.5 million level of contract activity in 2001). Year-over-year, however, pending transactions dropped by 21.1%.
“After nearly a year, the housing sector’s contraction is coming to an end,” said NAR Chief Economist Lawrence Yun. “Existing-home sales, pending contracts and new-home construction pending contracts have turned the corner and climbed for the past three months.”
While February’s rate is an increase, it is significantly lower than the previous increases of the past two months.The index previously rose 2.5% from November to December, and 8.1% from December to January.
Three U.S. regions posted monthly gains, while the West declined. The Northeast raised 6.5% to 72.5, a drop of 17% from last year. The Midwest improved 0.4% to 84.9, down 16.5% from last year. The South grew 0.7% to 99.3, dropping 21.7% from last year. The West decreased 2.4% to 64.6, shrinking 28.4% from one year ago.
“The affordable U.S. regions—the Midwest and South—are leading the recovery,” Yun added. “Mortgage rates have improved in recent weeks after the federal government guaranteed the status of most mortgages amidst uncertainty in the financial market. While access to commercial mortgage loans could become increasingly difficult, residential mortgage loans are expected to be more readily available.”
Bright MLS Chief Economist Dr. Lisa Sturtevant commented that “New pending sales rose for the third month in a row in February, but the 0.8% uptick over January was more modest than what we would see in a typical runup to the spring housing market. Homebuyers have been closely watching mortgage rates, which have been volatile during the first few months of the year. Even though rates ticked up in February, some buyers took the plunge anyway, anxious that mortgage rates would be moving even higher this spring.
“Pending sales activity might have been higher if there had been more homes available on the market. It seems inconceivable that even as mortgage rates are double what they were a year ago, we are still talking about how low inventory is making buying a home a competitive sport. Supply has increased from last year, but the number of homes available for sale is still just half of what it was three years ago,” continued Sturtevant. “This spring, the housing market will be much calmer than the fast-paced environment of 2021 or even 2022. At the same time, buyers will still face competition in the market and will need to be prepared to make an offer when they find a home they love. Sellers will find ready buyers if they set their list price realistically and are open to negotiations.”
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