Homes under contract are rising at a cautiously hopeful pace this spring.
The National Association of Realtors’ Pending home Sales Index climbed 3.4% in March, increasing to 78.2. Year-over-year, pending transactions were up 0.1%.
“March's Pending Home Sales Index – at 78.2 – marks the best performance in a year, but it still remains in a fairly narrow range over the last 12 months without a measurable breakout,” said NAR Chief Economist Lawrence Yun. “Meaningful gains will only occur with declining mortgage rates and rising inventory.”
NAR analysts are optimistic that existing home sales will rise by 9% in 2024 to 4.46 million and another 13.2% in 2025 to 5.05 million. Housing starts are expected to rise by 1.2% this year and 4.9% in 2025.
“Home sales have lingered at 30-year lows, and since 70 million more Americans live in the country now compared to three decades ago, it's inevitable that sales will rise in coming years,” Yun explained. “Inventory will grow steadily from more home construction, and various life-changing events will require people to trade up, trade down or move to another location.”
The Northeast, South and West posted monthly gains in purchase transactions while the Midwest recorded a March loss. Year-over-year, the Northeast and South reported decreases but the Midwest and West improved.
Also in NAR’s 2024 forecast is a 1.8% increase in median home prices to a record $396,800, along with another 1.8% in 2025, to $403,800.
“Home prices are expected to rise roughly in line with consumer price inflation and wage growth over the next two years," added Yun. "Most homeowners are on strong financial footing in current market conditions, with only 2% of sales classified as being distressed.”
Home sales are expected to improve steadily as the year progresses, even as home prices hit record highs.
“Job gains, steady mortgage rates and the release of inventory from pent-up home sellers will lead to more sales,” Yun pointed out. “Given the lingering housing shortage, home prices will march higher, albeit much more slowly than in the past.”
A recent uptick in homebuilding is expected to expand inventory as well.
“Additionally, many sellers who delayed listing in the past two years will start putting their homes on the market to move to a different home that better fits their new life circumstances – such as changes in family composition, jobs, commuting patterns and retirees wanting to be closer to their grandkids,” Yun said.
