Pending home sales warmed in February to their highest level in almost a year, rallying 5.5 percent in the National Association of REALTORS® (NAR) recently released Pending Home Sales Index (PHSI). The PHSI posted 112.3 in February, up from 106.4 in January—the second-highest reading since May 2006, at 112.5. The Index is based on contract signings.
According to Lawrence Yun, chief economist at NAR, the rebound is due to a combination of factors, including economic gains, rising rates and unseasonable temperatures.
“Buyers came back in force last month as a modest, seasonal uptick in listings were enough to fuel an increase in contract signings throughout the country,” says Yun. “The stock market’s continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year. Last month being the warmest February in decades also played a role in kickstarting prospective buyers’ house hunt.”
Activity thawed the most in the Midwest, where pending home sales sprung 11.4 percent to an Index reading of 110.8, as well as in the South, up 4.3 percent to 127.8. The Northeast saw a 3.4 percent increase in the Index to 102.1, while the West saw a 3.1 percent increase to 97.5.
The February scurry will give way to a spree in spring, with few days on market due to low supply, according to Yun.
“The homes most buyers are in the market for are unfortunately the most difficult to find and ultimately buy,” Yun says. “The country’s healthy labor market is translating to greater job security, but affordability is not improving because home prices in some areas are still outpacing incomes by three times or more because of tight supply. How much new and existing inventory there is on the market this spring will determine if sales can reach their full potential and finally start reversing the nation’s low homeownership rate.”
“Good options will remain scarce for many would-be buyers because there is still a major lack of affordable homes for sale, prices continue to rise and mortgage rates are heading up,” says Joseph Kirchner, senior economist at realtor.com®. “The good news is that warm winter weather has led to a surge in construction that will hopefully result in a bloom of new homes for sale this spring.”
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