Pending Home Sales Grew 2.0% in February

(Illustration courtesy of National Association of Realtors)

Pending home sales increased 2.0% in February, the National Association of Realtors reported Thursday.

The association’s Pending Home Sales Index–a forward-looking indicator of home sales based on contract signings–grew 2.0% in February to 72.0.

On a year-over-year basis, pending transactions declined 3.6%.

“Despite the modest monthly increase, contract signings remain well below normal historical levels,” NAR Chief Economist Lawrence Yun noted. He said a “meaningful decline” in mortgage rates would help both demand and supply–demand by boosting affordability, and supply by lessening the power of the mortgage rate lock-in effect.

Sam Williamson, Senior Economist with First American, noted purchase mortgage applications–another leading indicator of housing activity–rebounded slightly in March but also remain well below historical levels.

“Heading into spring, a modest seasonal increase in home-buying activity is expected,” Williamson said. “Nevertheless, challenges like affordability constraints and the ongoing rate lock-in effect continue to weigh heavily compared to the dynamics of pre-pandemic spring markets.”

Yun said he expects mortgage rates to slide moderately lower, given the Federal Reserve’s recent forecast for slower economic growth. “But the current high national debt will prevent mortgage rates from falling drastically – and certainly not to the 4%-to-5% range seen during President Trump’s first term,” he added.

Home price growth will likely moderate due to more supply coming onto the market, Yun said. “Having income and wages rise faster than home prices are welcome to improve affordability,” he added.