Pending Home Sales Improved In February

Pending home sales increased in February as inventory loosened up and buyers became accustomed to the high-rate environment.

NAR’s Pending Home Sales Index rose by 1.6% month-over-month to a reading of 75.6 last month. An index of 100 is equal to the level of contract activity in 2001.

Year-over-year, they were down 7%.

“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.”

All four U.S. regions saw declines in year-over-year sales, while month-over-month sales rose in the Midwest and South. The Northeast and West saw losses from January.

Southern states and the Rocky Mountain time zone have seen particularly strong job growth, but demand depends on other factors.

Yun noted that home prices are growing faster than wages in the Northeast and West, which he calls “not healthy” and a burden on first-time buyers.

However, stock shortages are set to ease as homebuilders finish new construction and sellers, locked into their homes by low monthly payments, find they can’t put off moving any longer.

“[M]any 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,” Yun said.

Inventory and demand will need to even out in order to encourage affordability. Listings are on the rise, but the number of homebuyers is as well, keeping home prices elevated.

The typical U.S. monthly housing payment hit a new record high of $2,721 during the four weeks ending March 24, up 10% YOY.