In what one analyst called “promising strides,” pending home sales rose to their highest level in seven months during February.
The National Association of Realtors (NAR) reports its Pending Home Sales Index (PHSI) -- a forward-looking indicator based on contract signings -- rose 3.5% to 109.1 last month. The PHSI is now 0.7% above the same month a year ago, and, while it has now increased year-over-year for 18 consecutive months, the annual gain in February was the smallest in that time frame.
NAR Chief Economist Lawrence Yun is encouraged by the February performance.
"After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year and a modest, seasonal uptick in inventory," he said. "Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what's being scooped up by a growing pool of buyers. Without adequate supply, sales will likely plateau."
Yun says the one silver lining from last month's noticeable slump in existing-home sales was that prices were up less than 4.4%. While that's still above wage growth, he says its more favorable -- from a buyer's perspective -- than the 8.1% annual increase in January.
"Any further moderation in prices would be a welcome development this spring," adds Yun. "Particularly in the West, where it appears a segment of would-be buyers are becoming wary of high asking prices and stiff competition."
Sales by region
All major regions except for the Northeast saw an increase in contract signings.
- The PHSI in the Northeast dipped 0.2% to 94.0 but is still 12.6% above a year ago.
- In the Midwest the index shot up 11.4% to 112.6 and is now 2.5% above the previous February.
- Contract signings in the South rose 2.1% to a reading of 122.4 but have posted a year-over-year decline of 0.4%.
- The index in the West climbed 0.7% to 96.4 but is now 6.2% below a year ago.
Existing-homes sales this year are projected to rise 2.4% from 2015 -- to around 5.38 million.
The national median prices for existing homes is expected to increase between 4% and 5%. Prices jumped 6.8% in 2015.