March Pending Home Sales Momentum Slows

Pending home sales, which had recently gained some momentum, slowed amid tight housing inventory in March, the National Association of Realtors said yesterday.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, declined by 0.8 percent to 111.4 in March from 112.3 in February. The index improved by 0.8 percent from a year ago.

Regionally, only the South (the largest region) saw improvement. Pending home sales there rose by 1.2 percent to an index reading of 129.4 in March and improved by 3.9 percent from a year ago. In the West, pending sales fell by nearly 3 percent to 94.5 and fell by 2.7 percent from a year ago. In the Northeast, pending sales fell by nearly 3 percent from February to 99.1 but improved by 1.8 percent from a year ago. In the Midwest the index declined by 1.2 percent to 109.6 from February and by 2.4 percent from a year ago.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said coming on the heels of a robust 5.5 percent gain in February, the March dip was expected.

“Pending home sales edged down in line with market expectations in March, as limited supply weighed on contract signings,” Vitner said. “Despite the decline, the index remains at a solid level consistent with continued improvement in existing home sales.”

NAR Chief Economist Lawrence Yun said inventory remains problematic. “Home shoppers are coming out in droves this spring and competing with each other for the meager amount of listings in the affordable price range,” he said. “In most areas, the lower the price of a home for sale, the more competition there is for it. That’s the reason why first-time buyers have yet to make up a larger share of the market this year, despite there being more sales overall.”

Yun said sellers are in the driver’s seat this spring as the intense competition for the few homes for sale is forcing many buyers to be aggressive in their offers. “Buyers are showing resiliency given the challenging conditions,” he said. “However, at some point–and the sooner the better–price growth must ease to a healthier rate. Otherwise sales could slow if affordability conditions worsen.”