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Pending home sales rose nationwide in April for the fourth consecutive month and reached their highest level in nine years, according to the National Association of Realtors (NAR). Led by the Northeast and Midwest, all four major regions saw increases in April. The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, increased 3.4 percent to 112.4 in April from a slight upward revision of 108.7 in March and is now 14.0 percent above April 2014 (98.6)—the largest annual increase since September 2012 (15.1 percent). The PHSI has now increased year-over-year for eight consecutive months and is at its highest level since May 2006 (112.5).
“Realtors are saying foot traffic remains elevated this spring despite limited—and in some cases severe—inventory shortages in many metro areas,” said Lawrence Yun, NAR chief economist. “Homeowners looking to sell this spring appear to be in the driver’s seat, as there are more buyers competing for a limited number of homes available for sale. As a result, home prices are up and accelerating in many markets.”
Following April’s decline in existing-home sales, Yun expects a rebound heading into the summer, but the likelihood of meaningful gains will depend on a much-needed boost in inventory and evidence of moderating price growth now that interest rates have started to rise.
“The housing market can handle interest rates well above four percent as long as inventory improves to slow price growth and underwriting standards ease to normal levels so that qualified buyers—especially first-time buyers—are able to obtain a mortgage,” said Yun.
After falling four straight months, the PHSI in the Northeast bounced back solidly (10.1 percent) to 88.3 in April, and is now 9.4 percent above a year ago. In the Midwest the index increased five percent to 113.0 in April, and is 13.3 percent above April 2014. Pending home sales in the South rose 2.3 percent to an index of 129.4 in April and are 14.8 percent above last April. The index in the West inched 0.1 percent in April to 103.8, and is 16.4 percent above a year ago.
Total existing-home sales in 2015 are forecast to be around 5.24 million, an increase of 6.1 percent from 2014. The national median existing-home price for all of this year is expected to increase around 6.7 percent. In 2014, existing-home sales declined 2.9 percent and prices rose 5.7 percent.