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Pending home sales in February increased to their highest level since June 2013, as sizeable gains in the Midwest and West offset smaller declines in the Northeast and South, according to the National Association of Realtors (NAR). The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose 3.1 percent to 106.9 in February from a slight downward revision of 103.7 in January and is now 12.0 percent above February 2014 (95.4). The index is at its highest level since June 2013 (109.4), has increased year-over-year for six consecutive months and is above 100—considered an average level of activity—for the 10th consecutive month.
“Pending sales showed solid gains last month, driven by a steadily-improving labor market, mortgage rates hovering around four percent and the likelihood of more renters looking to hedge against increasing rents,” Lawrence Yun, NAR chief economist, said. “These factors bode well for the prospect of an uptick in sales in coming months. However, the underlying obstacle—especially for first-time buyers—continues to be the depressed level of homes available for sale.”
According to NAR’s monthly Realtors Confidence Index, the percent share of first-time buyers increased slightly for the first time in February since November 2014, up to 29 percent from 28 percent in January.
“Several markets remain highly-competitive due to supply pressures, and Realtors® are reporting severe shortages of move-in ready and available properties in lower price ranges,” said Yun. “The return of first-time buyers this year will depend on how quickly inventory shows up in the market.”
The PHSI in the Northeast fell 2.3 percent to 81.7 in February, but is 4.1 percent above a year ago. In the Midwest the index leaped 11.6 percent to 110.4 in February, and is now 13.8 percent above February 2014. Pending home sales in the South decreased 1.4 percent to an index of 120.2 in February, but is still 10.8 percent above last February. The index in the West climbed 6.6 percent in February to 102.1 (highest since June 2013 at 111.4) and is now 18.3 percent above a year ago.
Total existing-homes sales in 2015 are forecast to be around 5.25 million, an increase of 6.4 percent from 2014. The national median existing-home price for all of this year is expected to increase around 5.6 percent. In 2014, existing-home sales declined 2.9 percent and prices rose 5.7 percent.