WASHINGTON (April 27, 2016) — Pending home sales increased slightly in March for the second consecutive month and reached their highest level in almost a year, according to the National Association of Realtors®. Only the West region saw a decline in contract activity last month.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, climbed 1.4 percent to 110.5 in March from an downwardly revised 109.0 in February and is now 1.4 percent above March 2015 (109.0). After last month’s slight gain, the index has increased year-over-year for 19 consecutive months and is at its highest reading since May 2015 (111.0).
Lawrence Yun, NAR chief economist, says last month’s pending sales increase signals a solid beginning to the spring buying season. “Despite supply deficiencies in plenty of areas, contract activity was fairly strong in a majority of markets in March,” he said. “This spring’s surprisingly low mortgage rates are easing some of the affordability pressures potential buyers are experiencing and are taking away some of the sting from home prices that are still rising too fast and above wage growth.”
In the short-term, the healthy labor market and favorable borrowing costs should lead to sustained buyer demand and a durable pace of sales. However, Yun says the consequences from a failure to construct more single-family homes in recent years are starting to impact some top job producing markets, where endless supply shortages continue to limit choices for buyers and are driving up prices beyond what a growing share of households can comfortably afford.
“Demand is starting to weaken in some areas, particularly in the West, where the median home price has risen an astonishing 38 percent in the past three years,” adds Yun. “As a result, pending sales in the region have now declined in four of the last five months and are lower than one year ago for the third month in a row. Closed sales in the region in March were also below last year’s pace.”
The PHSI in the Northeast increased 3.2 percent to 97.0 in March, and is now 18.4 percent above a year ago. In the Midwest the index inched up 0.2 percent to 112.8 in March, and is now 4.0 percent above March 2015.
Pending home sales in the South rose 3.0 percent to an index of 125.4 in March but are still 0.6 percent lower than last March. The index in the West declined 1.8 percent in March to 95.3, and is now 7.9 percent below a year ago.
Yun will present NAR’s 2016 midyear economic outlook and forecast on Thursday, May 12 from 8-10 a.m. at the 2016 REALTORS® Legislative Meetings & Trade Expo. U.S. Sen. Elizabeth Warren (D-Mass.) will join Yun to discuss current housing finance and consumer issues. A news release highlighting the key takeaways of Yun’s forecast and the session will be sent later in the morning.
Members of the media may register in advance to attend NAR’s legislative conference by contacting Yolanda Byrd, 202-383-7515 or firstname.lastname@example.org. Onsite press registration is in the Marriott Wardman Park Hotel Atrium at the Help Desk/Registration Assistance Counter. Hours are Mon., May 9, 10 a.m. -5 p.m.; Tues., May 10, 8 a.m. -5 p.m.; Wed., May 11 and Thur., May 12, 8 a.m. -6 p.m.; and Fri., May 13, 8 a.m. -3 p.m.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
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* The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent 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 2016 Veterans and Active Military Home Buyers and Sellers Profile will be released May 3, first quarter metropolitan area home prices will be released May 9, the second quarter Commercial Real Estate Report/Forecast will be released May 18, Existing-Home Sales for April will be reported May 20, and the next Pending Home Sales Index will be May 26; release times are 10:00 a.m. ET.