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WASHINGTON \ AP
More Americans signed contracts to buy homes in February, with purchases surging in the Midwest ahead of the traditional spring buying season.
The National Association of Realtors (NAR) said that its seasonally adjusted pending home sales index rose 3.5 percent to 109.1, rebounding from a 3 percent decline in January. The index has reached its highest level since July 2015.
The increase in signed contracts occurred last month despite a shortage of homes on the market. The gain suggests a strong start to the spring home buying season, after some recent reports have hinted at a possible slowdown as rising prices have hurt affordability. Pending sales contracts are a barometer of future purchases. A sale is typically completed a month or two after a contract is signed.
Regionally, signed contracts climbed 11.4 percent in the Midwest, with more modest gains in the South and West.
In the Northeast, the number of contracts dipped 0.2 percent.
Last week, the Realtors reported that completed sales tumbled 7.1 percent in February to a seasonally adjusted annual rate of 5.08 million. That drop-off came after relatively healthy sales levels in December and January, which were due in part to a new federal regulation that had delayed closings in November.
Monday’s pending sales report indicates that demand remains solid even though home prices are rising and buyers have a limited number of listings from which to choose.
The median home sales price was $210,800 in February, a 4.4 percent increase from a year ago.
Listings in February fell 1.1 percent from a year ago. February pending home sales data, based on contract signings that suggest future sales, was much stronger than the 1.1 per cent rise analysts had expected after a poor showing in January blamed in part on severe winter weather.
Many homeowners are hesitant to sell because they would need more equity to cover a down payment for upgrading to a new house. Investors have also turned many homes into rentals, further depriving the market of properties for sale. “The large rebound suggests that last month’s downturn was not the beginning of a protracted slump in housing activity, but rather just monthly noise,” said Barclays analyst Jesse Hurwitz. “We continue to view the US housing market as in a mode of gradual improvement.”
Year-over-year, pending sales were up 0.7 percent in February, the smallest annual gain in an 18-month streak of increases.
“After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year and a modest, seasonal uptick in inventory,” Lawrence Yun, NAR chief economist, said in a statement.
According to NAR, sales of existing, or previously owned, homes — the bulk of the US housing market — are expected to reach about 5.38 million this year, up 2.4 percent from 2015.
At February’s sales pace it would take 5.6 months to clear the supply of houses on the market, unchanged from January.
With the strengthening labour market boosting household formation and mortgage rates still low by historical standards, housing fundamentals remain solid.