February Pending Home Sales Slip 10.6%

Pending home sales fell for the second straight month in February, the National Association of Realtors reported yesterday. Each of the four major U.S. regions witnessed month-over-month declines in February, while results were mixed in the four regions year-over-year.

The Pending Home Sales Index (www.nar.realtor/pending-home-sales), a forward-looking indicator of home sales based on contract signings, dropped by 10.6% to 110.3 in February. Year-over-year, contract signings fell by 0.5%. An index of 100 is equal to the level of contract activity in 2001.

In the Northeast the index fell by 9.2% to 92.3 in February and by 3.9% from a year ago. In the Midwest, the index dropped 9.5% to 102.4 last month and fell by 6.1% a year ago.

Pending sales in the South declined by 13% to 133.2 in February, but improved by 2.9% from a year ago. The index in the West fell by 7.4% in February to 96.9, but improved by 1.9% from a year ago.

“The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market are swift but contracts are not clicking due to record-low inventory,” said Lawrence Yun, NAR chief economist. “Only the upper-end market is experiencing more activity because of reasonable supply. Demand, interestingly, does not yet appear to be impacted by recent modest rises in mortgage rates.”

Yun said nationally, homes priced at above $250,000 have largely been driving home sales for the last several months. However, he said even homes priced above $500,000 to less than $1 million are subject to the same low-inventory dilemma.

“Potential buyers may have to enlarge their geographic search areas, given the current tight market,” Yun said. “If there were a larger pool of inventory to select from – ideally a five- or a six-month supply – then more buyers would be able to purchase properties at an affordable price.”