The National Association of Realtors (NAR) reported that pending home sales rose 5.2% in January 2020—a year-over-year increase of 5.7%.
“This month’s solid activity—the second-highest monthly figure in over two years – is due to the good economic backdrop and exceptionally low mortgage rates,” said Lawrence Yun, NAR’s Chief Economist.
Yun, however, noted “we are still lacking inventory,” saying housing supply for the month was at the lowest level since 1999.
“Inventory availability will be the key to consistent future gains,” he said.
Yun said annual increases in pending home sales show a “strong desire” for homeownership. Among the markets drawing the most interest are Fort Wayne, Indiana; San Francisco; Sacramento, California; and San Jose, California.
“With housing starts hovering at 1.6 million in December and January, along with the favorable mortgage rates, among other factors, 2020 has so far presented a very positive sales climate,” Yun said. “Moreover, the latest stock market correction could provide exceptional, even lower mortgage rates for a few weeks, and that would help bring about a noticeable upturn in the coming months.”
The northeast’s Pending Home Sales Index (PHSI) in January was 1.23% higher than it was last year. The midwest saw its PHSI rise 7.3% from the prior month and 6.5% from January 2019.
Pending home sales in the south grew 8.7% month-over-month and 7.1% annually, while the west reported a 1.1% monthly drop in pending home sales. The west’s PHSI is still up 5.5% from last year.
Possibly leading to an increase in the PHSI, is another report of declining mortgage rates. Freddie Mac’s Primary Mortgage Market Survey states the average 30-year fixed-rate mortgage fell to 3.45% for the week ending on February 27.
“Given the recent volatility of the ten-year Treasury yield, it’s not surprising that mortgage rates again have dropped,” said Sam Khater, Freddie Mac’s Chief Economist. “These low rates combined with high consumer confidence continue to drive home sales upward, a trend that is likely to endure as we enter spring.”
The average rate of a 30-year fixed-rate mortgage last week was 3.49%.