Pending Home Sales Signal Strong Spring Market

Contract signings in the Midwest and South in February drovernpending home sales to their highest level in nearly two years.  The National Association of Realtors® (NAR) said today thatrnits Pending Home Sales Index (PHSI) rose 3.1 percent in February to 106.9.  The January index level, after a slightrndownward revision, was 103.7.  ThernFebruary number is 12.0 percent above the level in February 2014.  </p

According to NAR this is the sixth consecutive month thatrnthe index has increased compared to a year earlier and it has not been thisrnhigh since June 2013 when it was 109.4.  February was the 10^th consecutivernmonth that the index has been above 100 which is considered an average level ofrnactivity.  </p

The PHSI is based on the number of contracts executivernduring the month to purchase existing homes. These contracts are generally reflectedrnas completed sales within 60 days.</p

Lawrence Yun, NAR chief economist, says demand appears to be strengtheningrnas we head into the spring buying season. “Pending sales showed solid gainsrnlast month, driven by a steadily-improving labor market, mortgage ratesrnhovering around 4 percent and the likelihood of more renters looking to hedgernagainst increasing rents,” he said. “These factors bode well for the prospectrnof an uptick in sales in coming months. However, the underlying obstacle -rnespecially for first-time buyers – continues to be the depressed level of homesrnavailable for sale.”</p

According to NAR’s monthly Realtors Confidence Index, the share of firstrntime buyers rose slightly from 28 percent in January to 29 percent inrnFebruary.  It was the first increase forrnthis consumer segment since last November.  </p

“Several markets remain highly-competitive due to supply pressures, andrnRealtors are reporting severe shortages of move-in ready and availablernproperties in lower price ranges,” adds Yun. “The return of first-time buyersrnthis year will depend on how quickly inventory shows up in the market.”</p

NAR is forecasting that there will be around 5.25 million existing homesrnsold in 2015, a 6.4 percent increase from last year.  In 2014 those sales declined by 2.9rnpercent.  Existing home prices arernprojected to rise about 5.6 percent compared to a 5.7 percent increase in 2014.rn</p

The PHSI fell in both the Northeast and the South.  The Northeast, most of which was hit by repeatedrnsevere snow storms throughout the month, saw its index fall 2.3 percent to 81.7.  However the index remained 4.1 percent above itsrnFebruary 2014 level.  Pending sales inrnthe South slipped 1.4 percent from January to 120.2, 10.8 percent higher than arnyear earlier. </p

The losses in those two regions were more than offset by significant gainsrnin the Midwest and West.  In the former thernPHSI jumped 11.6 percent to 110.81, and was 13.8 percent higher than thernprevious February. The index in the West climbed 6.6 percent in February torn102.1, the highest level since June 2013. rnIt is now 18.3 percent above a year ago.</p

^*The Pending Home Sales Index is a leading indicator based on arnlarge national sample, typically representing about 20 percent of transactionsrnfor existing-home sales. An index of 100 is equal to the average level ofrncontract activity during 2001, which was the first year to be examined. Byrncoincidence, the volume of existing-home sales in 2001 fell within the range ofrn5.0 to 5.5 million, which is considered normal for the current U.S. population.

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