Pending Home Sales Increase 1.5%

Pending home sales in March increased by 1.5% from the prior month and declined 1.1% year over year, the National Association of Realtors said in yesterday’s Pending Home Sales report.

The report examines the level of home sales currently under contract.

On a month-over-month basis, pending home sales rose in the Northeast and South and declined in the Midwest and West. Year-over-year pending home sales rose in the South and declined in the Northeast, Midwest and West, the report noted.

“Contract signings rose in March despite higher mortgage rates, pointing to pent-up housing demand,” NAR Chief Economist Lawrence Yun said. He added that a greater supply of inventory will help translate that demand into more home sales.

“Demand sensitivity to mortgage rates is greatest among first-time buyers, particularly younger buyers,” Yun said. “As a result, boosting supply and new-home construction should focus on smaller, more affordable homes.”

“A good number of markets in the South experienced price cuts over the past year but recorded the strongest job growth,” Yun added. “That combination should lead to stronger housing market activity in the South this year.”

Ted Rossman, principal analyst with Bankrate, said the average 30-year fixed-rate mortgage jumped from 6.09% in February to 6.46%, cutting into affordability for homebuyers–especially first-timers. “Rates have fallen in two straight weeks, and if a lasting peace agreement [with Iran] can be reached, we should see that continue,” he said. “If the average 30-year fixed rate can get back to 6% or lower, that would significantly boost affordability as long as we don’t see a pop in prices. In fact, if you have strong credit and shop around aggressively, you can already get a rate in the upper 5’s. Six percent is an important psychological threshold for mortgage rates.”