In February, the National Association of REALTORS® reported a 1.6% increase in pending home sales, indicating a modest improvement in the housing market. This uptick was seen in the Midwest and South, which both experienced monthly gains in transactions, while the Northeast and West saw declines. Despite these monthly changes, all four U.S. regions faced year-over-year decreases in transactions.
The Pending Home Sales Index (PHSI), a predictive indicator of future home sales based on contract signings, rose to 75.6 in February. However, compared to the previous year, pending transactions declined by 7.0%. The PHSI benchmark of 100 corresponds to the contract activity level in 2001.
Lawrence Yun, the Chief Economist for the National Association of REALTORS®, commented that the modest sales growth, though not particularly exciting, signifies gradual improvement from the previous year’s lows. He attributed the increase in demand to ongoing job gains and a rise in inventory.
A regional breakdown of the Pending Home Sales Index revealed varied performance. The Northeast’s PHSI slightly decreased by 0.3% to 63.4, marking a 9.0% drop from February of the previous year. Conversely, the Midwest experienced a significant increase of 10.6% in its index, reaching 81.6, though it was still 2.5% lower than the year before.
The South saw a modest 1.1% increase in its PHSI to 89.5, yet this was an 8.5% decrease from the previous year. The West suffered a 6.5% decrease to 57.1 in its index, down 7.9% from February of the prior year.
Yun attributed the declines in the high-cost regions of the Northeast and West to affordability challenges, noting that the pace of home price increases outstripping income growth poses difficulties for first-time buyers. He also highlighted a likely increase in inventory due to recent growth in home building and anticipated listings from sellers who had postponed selling in the past two years. These sellers are now motivated by changes in their life circumstances, such as family composition, employment, commuting patterns, and the desire of retirees to live closer to their grandchildren.
For the full details and insights, please refer to the original press release at the following link: https://www.nar.realtor/newsroom/pending-home-sales-rose-1-6-in-february