Pending Home Sales Increase to Highest Level in Almost a Year
The National Association of Realtors index forecasts future sales by tracking real estate transactions in which a contract has been signed, but the deal has not yet closed.
CHICAGO – Pending home sales increased 1.4% to an index reading of 110.5 in March to mark its highest level in nearly a year, according to a report released Wednesday by the National Association of Realtors. Only the West region was hit with a decline in contract activity last month, which NAR attributed to excessive home prices.
NAR’s Pending Home Sales Index forecasts future sales by tracking real estate transactions in which a contract has been signed, but the deal has not yet closed. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined.
The index has increased for 19 straight months in terms of year-over-year gains. It is at its highest level since May 2015 when it hit 111. March’s index bested a 0.7% rise projected by economists who were surveyed by MarketWatch.
Even with supply deficiencies in numerous regions, contract activity was fairly strong in a majority of markets in March, NAR Chief Economist Lawrence Yun stated in a press release (see video below).
“This spring’s surprisingly low mortgage rates are easing some of the affordability pressures potential buyers are experiencing and are taking away some of the sting from home prices that are still rising too fast and above wage growth,” he said.
Existing home sales rose 5.1% in March to an annualized rate of 5.33 million units, according to NAR. Economists had expected a rise to 5.27 million after a sharp drop in February.
A healthy labor market and favorable borrowing costs are expected to fuel sustained home buyer demand and a stable pace of sales. However, Yun says the failure in recent years to construct more single-family homes is beginning to negatively impact some areas of the U.S. with robust job-producing markets. The supply shortage is limiting choices for buyers and driving up prices beyond what a growing share of households can comfortably afford.
“Demand is starting to weaken in some areas, particularly in the West, where the median home price has risen an astonishing 38% in the past three years,” Yun said. “As a result, pending sales in the region have now declined in four of the last five months and are lower than one year ago for the third month in a row. Closed sales in the region in March were also below last year’s pace.”
Following is the Pending Home Sales Index by region for March:
In the Northeast the index increased 3.2% to 97, and is now 18.4% above a year ago. In the Midwest the index inched up 0.2% to 112.8, and is now 4%p above March 2015. Pending home sales in the South rose 3% to an index of 125.4 but are still 0.6% lower than last March. The index in the West declined 1.8% to 95.3 and is now 7.9% below a year ago.
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