Pending home sales rose solidly in February to its highest level in seven months, according to the National Association of Realtors® (NAR). Led by a sizeable increase in the Midwest, all major regions except for the Northeast saw an increase in February contract activity.
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose 3.5 percent to 109.1 in February from a downwardly revised 105.4 in January and it’s 0.7 percent higher year-to-year. The index has now increased year-over-year for 18 consecutive months, though last month’s annual gain was the smallest.
“After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year and a modest, seasonal uptick in inventory,” says Lawrence Yun, NAR chief economist.
“Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what’s being scooped up by a growing pool of buyers,” Yun adds. “Without adequate supply, sales will likely plateau.”
According to Yun, last month’s noticeable slump in existing-home sales had one silver lining: Price appreciation lessened to 4.4 percent, which is still above wage growth but more favorable than the 8.1 percent annual increase in January.
“Any further moderation in prices would be a welcome development this spring, particularly in the West, where it appears a segment of would-be buyers are becoming wary of high asking prices and stiff competition,” adds Yun.
Existing-homes sales this year are forecast to be around 5.38 million, an increase of 2.4 percent from 2015. The national median existing-home price for all 2016 is expected to increase between 4 and 5 percent. In 2015, existing-home sales increased 6.3 percent and prices rose 6.8 percent.
The PHSI in the Northeast declined 0.2 percent to 94.0 in February, but it’s still 12.6 percent above a year ago. In the Midwest, the index shot up 11.4 percent to 112.6 in February, and it’s now 2.5 percent above February 2015.
Pending home sales in the South increased 2.1 percent to an index of 122.4 in February but it’s 0.4 percent lower than last February. The index in the West climbed 0.7 percent in February to 96.4, but it’s now 6.2 percent below a year ago.
Source: FloridaRealtors/March 28, 2016.