Contract signings for existing homes are starting to show signs of recovery, with pending home sales growing 1.6% in February from the previous month, according to new data from the National Association of Realtors.
The 75.6 index reading is the biggest month-over-month gain since last December, indicating a positive trend in the housing market. An index level of 100 is equal to the pace of contract activity in 2001.
Despite high mortgage rates hovering over 7% in mid-February, the increase in inventory is boosting the market. Both buyers and sellers have been hesitant due to the high rates, leading to a 7.0% annual decline in pending sales in the resale market.
NAR chief economist Lawrence Yun noted that while the modest sales growth may not be cause for excitement, it does show slow and steady progress from the lows of late last year. Ongoing job gains are increasing demand, along with more inventory entering the market.
Yun also mentioned that there will be a rise in inventory from recent growth in homebuilding, as well as sellers who have delayed listing their homes in the past two years. These sellers may now be putting their homes on the market to better fit their new life circumstances.
Regionally, contract signings in the Northeast fell 0.3% from last month, while the West saw a monthly dip of 6.5% in February. The Midwest, however, experienced a 10.6% gain in transactions with sales under contract, and the South rose 1.1% in February.
Yun pointed out that high-cost regions in the Northeast and West are facing affordability challenges, with home prices rising faster than income growth. This poses difficulties for first-time buyers looking to enter the market.
Overall, the increase in pending home sales is a positive sign for the housing market, indicating a slow but steady recovery in the industry.
