Spring Surge? Existing Home Contract Signings Up in February, Sees 1.6% Increase in Pending Home Sales

 

• Pending home sales in the US, which signify contract signings for existing homes, regained momentum in February as some buyers hurried to secure deals before mortgage rates climbed further.
• Following a dip in January, the pending home sales index rose by 1.6% in February, as reported by the National Association of Realtors (NAR) on Thursday. Despite this increase, the index stood at 75.6, marking its lowest February level since NAR began tracking the data in 2001. A reading below 100 indicates a slower pace of pending contracts.

• Although the figure exceeded the Bloomberg consensus of a 1.5% rise, year-over-year contract signings saw a decline of 7%, according to NAR.

• This uptick in the index, considered an early gauge of the housing market’s health, suggests that buyers are adjusting to higher rates. A modest increase in new listings may have attracted buyers, alongside a sense of urgency to act before rates climbed further.
• Keith Gumbinger, vice president of HSH.com, indicated, “Mortgage conditions were only marginally less favorable in February compared to January,” noting that the increase in rates might have dampened activity last month. Rates surged from 6.63% to 6.94% by the end of February and have since remained near 7%.

• Inventory challenges persist as a concern heading into spring, with Lisa Sturtevant, chief economist at Bright MLS, anticipating an increase in pending sales activity in March, even if mortgage rates do not decrease significantly.

• Despite the overall positive trend, higher-cost regions continue to face difficulties. Pending home sales in the Northeast dropped by 0.3% month over month, while in the West, contract signings fell by 6.5% in February compared to the previous year.

• In contrast, Southern states experienced gains in inventory, with the South seeing a 1% increase in contract signings. The Midwest also recorded a more than 10% rise in pending transactions in February. These increases in activity could be attributed to the growing availability of homes in these regions.

• Lawrence Yun, chief economist at NAR, emphasized the challenges posed by rising home prices outpacing income growth, particularly for first-time buyers.
• Overall, while inventory constraints may persist in the spring market, conditions are expected to gradually improve, potentially prompting more sellers to list their homes despite prevailing high mortgage rates.