Pending Home Sales Increase in February

(Chart courtesy of National Association of Realtors. Thumbnail illustration courtesy of Mike Sorohan)

Pending home sales increased 1.8% in February but declined 0.8% year over year, the National Association of Realtors reported Tuesday.

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

“The slight gain in pending contracts appears to be driven by improved affordability conditions. However, those conditions could reverse if higher oil prices lead to an uptick in mortgage rates,” NAR Chief Economist Lawrence Yun said. “The Midwest–the most affordable region of the country–was the strongest performer in February. But the Northeast was held back by a combination of higher home prices and a shortage of supply.”

Yun noted purchasing a home is not a snap decision for first-time homebuyers. “It takes time to build credit, save for a down payment and fulfill existing rental lease agreements,” he said. “Still, there is sizable pent-up demand that could be released into the market. Although job gains have been sluggish in recent months, there are still 6 million more jobs in the country than in the pre-COVID period.”

Bankrate Principal Analyst Ted Rossman noted that affordability improved in February due to lower mortgage rates and declining home prices, especially in Sun Belt locations with housing markets that have cooled after rapid run-ups in price. “By some measures — including Freddie Mac’s weekly survey — the average 30-year fixed mortgage rate fell below 6% in February for the first time in about three-and-a-half years,” he said. “That was short-lived, however, as the war in Iran has pushed Treasury yields (and, in turn, mortgage rates) higher because of inflation fears.”