Pending Home Sales Reverse Course in February, Rise 3.1%

Pending home sales rebounded in much of the country in February, the National Association of Realtors reported yesterday.

NAR said its Pending Home Sales Index, a forward-looking indicator based on contract signings, rose by 3.1 percent to 107.5 in February from a downwardly revised 104.3 in January. From a year ago, however, the index fell by 4.1 percent.

All four regions saw modest increases. Pending sales in the South rose by 3.0 percent to 125.7 in February, but were 1.5 percent lower than a year ago. The West rose by 0.4 percent to 96.9, but were 2.2 percent below a year ago. The Northeast jumped by 10.3 percent to 96.0 in February, but was 5.1 percent below a year ago. In the Midwest the index inched forward by 0.7 percent to 98.9, but were 9.5 percent lower than a year ago.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., noted winter months can be deceiving, “particularly if one winter is harsher as seems to be the case in 2018.”

“Seasonal factors have distorted monthly readings in 2018, but contract signings have been slowing on trend,” Vitner said. “Strong demand and a lack of supply have made it difficult for buyers to find a home. Rising mortgage rates may cause some homeowners to remain in place to keep their current low mortgage rate. A growing share of consumers feel that now is a good time to sell a house, which hopefully will bring more supply to the market this spring.”

NAR Chief Economist Lawrence Yun said weakening affordability and not enough inventory on the market has put the spring housing market on an uneven start so far in 2018.

“Contract signings rebounded in most areas in February, but the gains were not large enough to keep up with last February’s level, which was the second highest in over a decade,” Yun said. “The expanding economy and healthy job market are generating sizeable homebuyer demand, but the miniscule number of listings on the market and its adverse effect on affordability are squeezing buyers and suppressing overall activity.”

Yun said NAR expects ongoing volatility in the Northeast region at least through March. “Although pending sales there bounced back in February following January’s cold weather-related decline, the multiple winter storms over these last few weeks likely put a chill on contract signings once again this month,” he said.

But Yun also noted many would-be sellers continue to balk at listing their home for sale out of uneasiness of losing their low mortgage rate – especially if they refinanced in recent years. “Homeowners are already staying in their homes at an all-time high before selling, and any situation where they remain put even longer only exacerbates the nation’s inventory crunch,” He said. “Even if new home construction starts picking up at a faster pace this year, as expected, existing sales will fail to break out if these record low supply levels do not recover enough to meet demand.”