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Pending Home Sales Increase Ahead of the Homebuying Season

February saw a growth in the number of sales contracts signed for homes with the Pending Home Sales Index data released by the National Association of Realtors (NAR) rising 3.1 percent during the month after a slipping in January. The Pending Home Sales Index is a forward-looking indicator based on contract signings. According to NAR, a sale is listed as pending when the contract has been signed but the transaction has not closed.

On a year-over-year basis, the index was down 4.1 percent. Regionally too, the year over year sales was down with the Midwest taking the biggest hit with a decline of 9.5 percent on the index.

While these numbers are encouraging, they are still well below the contract signings recorded last year. “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),” said Lawrence Yun, Chief Economist at NAR. “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.”

As we get closer to the homebuying season, experts are keeping a close watch on the housing supply as well as the rising mortgage rates.

Buyers face two headwinds in the market—rising home prices and higher mortgage rates—that make finding an affordable home a challenge. Younger buyers, who are often less-well positioned to compete with more experienced, cash-rich older buyers are the most impacted,” said Danielle Hale, Chief Economist at Realtor.com. “For this reason, in spite of the improvement from last month, signed contracts fall behind last year’s pace and suggest that home sales will struggle to finish ahead of last year’s pace unless inventory improves.”

“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,” Yun said.

About Author: Radhika Ojha

Radhika Ojha, Online Editor at the Five Star Institute, is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Dallas, Texas. You can contact her at Radhika.Ojha@theMReport.com.

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