Pending sales signal modest improvement in housing market
NAR reported that February pending home sales were up 0.8% from January, making it the third consecutive month of increases.
- Pending sales and other indicators suggest the market has bottomed out and is now improving, said NAR's Lawrence Yun.
- Homes coming under contract are still down substantially from a year ago, when the market was overheated.
- All regions except the West posted month-to-month gains in pending sales.
Home sales may have reached a bottom — and are starting to tick back up.
The National Association of Realtors reported that pending home sales grew in February for the third consecutive month, despite a steady rise in interest rates throughout the month. Three U.S. regions posted gains, while the West is still seeing declines on a monthly basis. Year-over-year, all four regions posted decreases in transactions.
The month-to-month increase was a modest 0.8%, while the year-over-year decline was 21.1%, according to the report.
Combined with positive movement in existing home sales and new home construction starts, the industry has reason to be optimistic, said NAR Chief Economist Lawrence Yun. "After nearly a year, the housing sector's contraction is coming to an end," Yun said.
While the month-to-month increase was a welcome finding, the rate is still a bit slower than the usual run-up to the spring homebuying season, said Lisa Sturtevant, chief economist at Bright MLS.
"Pending sales activity might have been higher if there had been more homes available on the market," Sturtevant said, noting that inventory is still half of what it was three years ago. "It seems inconceivable that even as mortgage rates are double what they were a year ago, we are still talking about how low inventory is making buying a home a competitive sport."
While the uptick in homes coming under contract is something the real estate industry can celebrate, it's also showing that this recovery will be a slow, gradual process, said Danielle Hale, chief economist at Realtor.com.
"Today's pickup in activity signals that it is possible for buyers and sellers to come to an agreement on the terms of sale, but other market data point to the importance of having reasonable, data-based expectations of today's housing market in order to find success," Hale said.
Broken down by regions, the Northeast had the biggest month-to-month increase, rising 6.5%. It was still down 17% year-over-year. The Midwest and South had modest gains of under 1%, while the West was down 2.4% month-to-month and off by 28.4% year-over-year.
Yun noted that improved mortgage rates have helped bring some buyers back into the market, and so far the bank failures that happened earlier this month appear to be contained.
"While access to commercial mortgage loans could become increasingly difficult, residential mortgage loans are expected to be more readily available," Yun said.