Pending home sales reverse course, rise 3.1 percent during February

WASHINGTON — Pending home sales snapped back in much of the country in February, but weakening affordability and not enough inventory on the market restricted overall activity compared to a year ago, according to a report by the National Association of Realtors.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, grew 3.1 percent to 107.5 in February from a downwardly revised 104.3 in January. Even with last month’s increase in activity, the index is 4.1 percent below a year ago.

Lawrence Yun, chief economist for the NAR, said the housing market has gotten off to an uneven start so far in 2018.

“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),” Yun said.

“The expanding economy and healthy job market are generating sizable homebuyer demand, but the minuscule number of listings on the market and its adverse effect on affordability are squeezing buyers and suppressing overall activity,” he said.

The real estate market in parts of the nation will likely see a slight drop in sales for March, Yun said.

“Expect ongoing volatility in the Northeast region, at least through March,” he said. “Although pending sales there bounced back in February following January’s cold-weather-related decline, the multiple winter storms over these last few weeks likely put a chill on contract signings once again this month.”

With the start of the spring buying season in full swing, Yun said he believes one of the top wild cards for the housing market in coming months will be how both buyers and potential sellers adjust to the steady climb in mortgage rates since late last year.

Prospective buyers continue to feel the strain of swift price growth, which is up 5.9 percent so far in 2018, and the higher borrowing costs will only add to the pressures placed on their budgets. Meanwhile, if more would-be sellers balk at listing their homes for sale out of uneasiness of losing their low mortgage rate, especially if they refinanced in recent years, it would not be good news for any alleviation of the ongoing supply shortages in much of the country.

“Homeowners are already staying in their homes at an all-time high before selling, and any situation where they remain put even longer only exacerbates the nation’s inventory crunch,” Yun said. “Even if newhome construction starts picking up at a faster pace this year, as expected, existing sales will fail to break out if these recordlow supply levels do not recover enough to meet demand.”

For the year, Yun now forecasts that existing-home sales will be around 5.51 million, a number basically unchanged from 2017. The national median existing-home price is expected to increase around 4.2 percent. In 2017, existing sales increased 1.1 percent, and prices rose 5.8 percent.

The PHSI in the Northeast surged 10.3 percent to 96.0 in February but is still 5.1 percent below a year ago.

In the Midwest, the index inched forward 0.7 percent to 98.9 in February but is 9.5 percent lower than February 2017.

Pending home sales in the South rose 3.0 percent to an index of 125.7 in February but are 1.5 percent lower than last February.

The index in the West climbed 0.4 percent in February to 96.9 but is 2.2 percent below a year ago.