The number of pending U.S. home sales, a measure of contract closings on existing homes, gained momentum in February as some buyers scrambled to get ahead of rising mortgage rates.
The Home Sales Pending Index rose 1.6% in February after declining in January, according to data released Thursday by the National Association of Realtors (NAR). The 75.6 reading was his lowest in a month since NAR first began tracking his data in 2001. A number below 100 indicates that the pace of outstanding contracts is slowing.
The figure beat the Bloomberg consensus for a 1.5% increase. Still, the number of deals signed was down 7% from a year earlier, according to NAR's research.
The rise in the index, an early indicator of the health of the housing market, was a sign that buyers were accepting higher interest rates. A slight increase in the number of new listings may be helping attract buyers, as well as a sense of urgency about competition from rising interest rates.
Keith Gumbinger, vice president of HSH.com, speculates as much.
“Mortgage conditions were only slightly worse in February compared to January,” he said, noting that higher interest rates may have slowed some activity last month. Interest rates rose from 6.63% to 6.94% by the end of February and continue to hover around 7%.
Inventory issues will also continue to be a concern heading into the spring.
“The main constraint on home sales transactions is the lack of inventory,” Lisa Sturtevant, chief economist at Bright MLS, told Yahoo Finance. “New listing activity is starting to increase and supply is also trending upward. As a result, we believe pending sales activity will increase in March, even if mortgage rates do not fall significantly.”
High cost regions continue to struggle
Pending home sales tend to outpace existing home sales by a month or two, but the nation's most expensive regions still lag, a theme that could continue this spring.
In the Northeast, pending transactions decreased by 0.3% month-on-month and by 9% from February 2023 levels. As for the West, the number of contract signings decreased by 6.5% in February, and was down nearly 8% year-on-year.
Low-priced homes in the $200,000 to $300,000 range remain rare in these areas, according to Realtor.com. In fact, major metros in the West and Northeast he reported inventory declines of 1% and 4.2%, respectively, in February.
“High-cost regions in the Northeast and West experienced recessions due to affordability challenges,” said NAR Chief Economist Lawrence Yun. “Housing prices are rising faster than income growth. [It’s] It's not healthy and creates more challenges for first-time buyers. ”
Inventories increase in southern states
The South and Northeast presented different prospects for potential buyers.
In the southern region, the number of contracts signed increased by 1%, but decreased by 8.5% compared to the previous year. Meanwhile, in the Midwest, pending deals rose more than 10% in February, but deal value fell 2.5% year over year.
The increased activity in both the South and Northeast may be due to increased housing availability in these regions. According to Realtor.com, in the South there was a significant increase in housing availability from $200,000 to $350,000 in February. Home prices within this range have increased by more than 20% compared to last year.
In Orlando, overall inventory has increased by more than 38% compared to pre-pandemic. That was followed by Miami at 37% of him and Tampa at 36%.
Other popular Southern metropolises include San Antonio, where inventory has increased more than 27%, Austin (11%) and Dallas (just over 2%), according to Realtor.com.
“I think inventory will continue to be a constraint on the market this spring. But I think conditions will ease, even if interest rates remain high,” Sturtevant said. “This spring could be a season of ‘whatever happens in life’ for sellers. Changes in family and economic circumstances will likely encourage more homeowners to list their homes, even if the difference between mortgage rates and current rates remains large. ”
Gabriela Cruz Martinez I'm a personal finance and housing reporter for Yahoo Finance. Follow her on X @__Gabriela Cruz.
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