NAR: Pending homes up, despite affordability, supply issues
Pending home sales gained 3.1% to an index reading of 107.5 in February, from a downwardly revised 5.0% decline to 104.3 in January, first reported as a 4.7% drop to 104.6, according to a report released Wednesday by the National Association of Realtors.
An index of 100 is equal to the average level of contract activity during 2001.
Year-over-year the pending homes sales index decreased 4.1% from last February, when the index was 112.1.
IFR Markets predicted the index would be up 2.1%.
Regionally, pending sales were up. The Northeast saw a 10.3% gain to 96.0, and sales grew 0.7% to 98.9 in the Midwest, while rising 3.0% in the South to 125.7 , and climbing 0.4% in the West to 96.9.
“Contract signings rebounded in most areas in February, but the gains were not large enough to keep up with last February’s level, which was the second highest in over a decade (112.1),” NAR Chief Economist Lawrence Yun said. “The expanding economy and healthy job market are generating sizeable homebuyer demand, but the miniscule number of listings on the market and its adverse effect on affordability are squeezing buyers and suppressing overall activity.”
Weather issues will likely lead to volatility in the Northeast numbers through March, as recent storms “likely put a chill on contract signings once again this month,” Yun said.
How buyers and sellers adjust to rising mortgage rates will determine the housing market’s fate this spring. Buyers will be constrained by higher costs, while sellers may fear the higher cost of a new mortgage for a new home.
With homeowners already keeping their homes longer than in the past, “any situation where they remain put even longer only exacerbates the nation’s inventory crunch,” said Yun. “Even if new home construction starts picking up at a faster pace this year, as expected, existing sales will fail to break out if these record low supply levels do not recover enough to meet demand.”
Existing home sales are expected to be near last year’s 5.51 million rate, according to Yun, with prices growing 4.2%. In 2017, existing sales rose 1.1%, with prices up 5.8%.