Pending home sales increased 1.6% in February, with the Midwest and South each posting monthly gains in transactions, while the Northeast and West posted losses. All four U.S. regions saw year-over-year decreases, however, according to a March 28 report from the National Association of REALTORS® (NAR).
The Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—increased to 75.6 in February (an index of 100 is equal to the level of contract activity in 2001). Pending transactions were down 7% year-over-year in February.
“While modest sales growth might not stir excitement, it shows slow and steady progress from the lows of late last year,” said NAR Chief Economist Lawrence Yun. “Ongoing job gains are clearly increasing demand along with more inventory.”
Yun also noted that the high-cost regions in the Northeast and the West experienced losses as a result of affordability changes, a challenge for prospective buyers looking to get off the sidelines and purchase their first home.
“The high-cost regions in the Northeast and West experienced pullbacks due to affordability challenges. Home prices rising faster than income growth is not healthy and adds challenges for first-time buyers,” explained Yun.
“There will be a steady rise in inventory from recent growth in home building,” he added. “Additionally, many sellers, who delayed listing in the past two years, will begin to put their homes on the market to move to a different home that better fits their new life circumstances—such as changes in family composition, jobs, commuting patterns and retirees wanting to be closer to their grandkids.”
“After three years of unusual spring housing markets, we should not expect this one to necessarily feel ‘normal,’” said Bright MLS Chief Economist Dr. Lisa Sturtevant. “Homebuyers have been resilient in the face of elevated mortgage rates and low inventory, but household savings rates are down and household debt is rising, making some individuals and families feel more cautious. Inventory will increase, though the number of homes available for sale will still be relatively low. As a result, I expect more home sales this spring, but the spring housing market could extend into summer as homebuyers wait for lower rates and more listings.”
For the full report, click here.
