WASHINGTON – April 27, 2016 – Pending home sales increased slightly in March for the second consecutive month, reaching its highest level in almost a year, according to the National Association of Realtors® (NAR).
Only the West region of the United States saw a decline in contract activity last month.
The Pending Home Sales Index is a forward-looking indicator based on contract signings. It climbed 1.4 percent to 110.5 in March from a downwardly revised 109.0 in February and is now 1.4 percent higher year-to-year.
After last month’s slight gain, the index has increased year-over-year for 19 consecutive months and is at its highest reading since May 2015 (111.0).
“Despite supply deficiencies in plenty of areas, contract activity was fairly strong in a majority of markets in March,” says Lawrence Yun, NAR chief economist. “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.”
In the short-term, a healthy labor market and favorable borrowing costs should lead to sustained buyer demand and a durable pace of sales. However, Yun says a failure to construct more single-family homes in recent years is starting to impact some top job producing markets, where endless supply shortages continue to limit choices for buyers and drive 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 percent in the past three years,” says Yun. “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.”
Pending sales in the Northeast increased 3.2 percent to 97.0 in March, and are now 18.4 percent above a year ago. In the Midwest, the index inched up 0.2 percent to 112.8 in March, and it’s now 4.0 percent above March 2015.
Pending home sales in the South rose 3.0 percent to an index of 125.4 in March but they’re still 0.6 percent lower than last March. The index in the West declined 1.8 percent in March to 95.3, and is now 7.9 percent below a year ago.
© 2016 Florida Realtors® Reprinted with permission Florida Realtors. All rights reserved.