The National Association of Realtors (NAR) recently reported in their Pending Home Sales Index (PHSI) that, pending home sales increased in April for the fourth consecutive month and reached their highest peak in nine years. All four major regions saw growth in April, led by the Northeast and Midwest.
“The steady gains in contract activity each month this year highlight the fact that buyer demand is strong,” said Lawrence Yun, NAR chief economist. "Realtors are saying foot traffic remains elevated this spring despite limited—and in some cases severe—inventory shortages in many metro areas. “
The index is a forward-looking indicator based on contract signings, NAR reported. It increased 3.4 percent to 112.4 in April from a slight upward revision of 108.7 in March and is now 14 percent above 98.6 in April 2014. This is the largest annual increase since 15.1 percent in September 2012. Year-over-year, the index has increased for eight consecutive months and is at its highest level since 112.5 in May 2006.
"Homeowners looking to sell this spring appear to be in the driver's seat, as there are more buyers competing for a limited number of homes available for sale,” Yun said. "As a result, home prices are up and accelerating in many markets."
Yun expects a rebound heading into the summer, following April’s decline in existing-home sales, but the chance of significant gains will depend on an increase in inventory and evidence of moderating price growth now that interest rates have started to rise.
"The housing market can handle interest rates well above 4 percent as long as inventory improves to slow price growth and underwriting standards ease to normal levels so that qualified buyers—especially first-time buyers—are able to obtain a mortgage,” Yun adds.
The PHSI in the Northeast saw 10.1 percent of growth to 88.3 in April, and is now 9.4 percent above a year ago after dropping for four straight months. The Midwest the index increased 5 percent to 113 in April, and is 13.3 percent above April 2014.
According to the report, pending home sales in the South saw an increase of 2.3 percent to an index of 129.4 in April and are 14.8 percent above last year. The index in the West saw a small increase of 0.1 percent in April to 103.8, and is 16.4 percent above a year ago.
The Realtors expect for total existing-home sales in 2015 to be around 5.24 million, an increase of 6.1 percent from 2014. The national median existing-home price for all of this year is expected to increase around 6.7 percent. In 2014, existing-home sales declined 2.9 percent and prices rose 5.7 percent.
“Our realtor.com activity this spring has been predicting strong sales,” said Johnathan Smoke, NAR chief economist. “Sales would be even higher if inventory was growing as quickly as demand, but instead we’ve had 32 straight months of the supply of existing homes on the market under 6 months. That’s why we’re seeing higher levels of price appreciation this year. All this bodes well for continued momentum into May and June.”