There are some signs of recovery in the number of contracts for existing homes.
Pending home sales rose 1.6% in February from the previous month, according to new data from the National Association of Realtors. The index value was 75.6, the largest month-on-month increase since December last year. Index level 100 corresponds to the pace of contract activity in 2001.
The rise in the index, a leading indicator of the health of the housing market, shows how a recovery in inventory is boosting the market even as interest rates remain high. Both buyers and sellers will be on the sidelines, resulting in a 7.0% annual decline in pending sales on the resale market.
Mortgage interest rates have hovered above 7% every day since mid-February, turning away buyers who are sensitive to interest rates.
“Moderate sales growth may not inspire excitement, but it does indicate slow and steady progress from the lows late last year,” NAR Chief Economist Lawrence Yun said in a press release. “There is,” he said. “Continued employment growth is clearly increasing demand as well as increasing inventory.”
He added, “Inventory will steadily increase due to recent growth in home construction. Additionally, many sellers who have postponed listing over the past two years have experienced changes in their family structure, work, commuting patterns, and retirees. They will probably start selling their home in order to move into another house that is more suitable for their new living situation, such as Hope, to be closer to their grandchildren.”
By region, the number of contracts signed in the Northeast decreased by 0.3% month-on-month, while the West recorded a monthly decline of 6.5% in February. Meanwhile, contract sales in the Midwest increased by 10.6% in February, and in the South by 1.1%.
“High-cost regions in the Northeast and West experienced weaker performance due to affordability challenges,” Yun said. “It is not healthy for house prices to rise faster than income growth, and it creates additional challenges for first-time buyers.”
