Pending home sales rose in March, reversing course from a month prior, according to the National Association of Realtors®. Three of the four major regions saw growth last month, as the Northeast reported a minor slip in contract activity.
The Pending Home Sales Index,* www.nar.realtor/pending-home-sales, a forward-looking indicator based on contract signings, increased 3.8% to 105.8 in March, up from 101.9 in February. Year-over-year contract signings declined 1.2%, making this the 15th straight month of annual decreases.
Lawrence Yun, NAR chief economist, noted that pending home sales data has been exceptionally fluid over the past several months but predicted that numbers will begin to climb more consistently. “We are seeing a positive sentiment from consumers about home buying, as mortgage applications have been steadily increasing and mortgage rates are extremely favorable.”
Yun noted that sales activity in the West had increased at a relatively stable rate for five consecutive months before the region saw a significant spike in activity in March. “Despite some affordability issues in the West, the numbers indicate that there is a reason for optimism. Inventory has increased, too. These are great conditions for the region.”
Pointing to active listings from data at realtor.com®, Yun says the year-over-year increases indicate a potential rise in inventory. Denver-Aurora-Lakewood, Colo., Seattle-Tacoma-Bellevue, Wash., San Francisco-Oakland-Hayward, Calif., Portland-Vancouver-Hillsboro, Ore.-Wash., and Nashville-Davidson-Murfreesboro-Franklin, Tenn., saw the largest increase in active listings in March compared to a year ago.
Although pending contracts appear to be on an overall upswing, Yun says current sales activity is underperforming. “In the year 2000, we had 5 million home sales. Today, we are close to that same number, but there are 50 million more people in the country,” he said. “There is a pent-up demand in the market, and we should see a better performing market in the coming quarters and years.”
March Pending Home Sales Regional Breakdown
The PHSI in the Northeast declined 1.7% to 90.5 in March and is now 0.4% below a year ago. In the Midwest, the index grew 2.3% to 95.3 in March, 5.0% lower than March 2018.
Pending home sales in the South jumped up 4.4% to an index of 127.2 in March, which is 0.7% higher than last March. The index in the West ascended 8.7% in March to 95.1 and fell only 1.6% below a year ago.
The National Association of Realtors® is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
NOTE: NAR’s April Housing Minute video will be released on April 30, Existing-Home Sales for April will be reported May 21, and the next Pending Home Sales Index will be May 30; all release times are 10:00 a.m. ET.