Pending home sales rose in April for the fourth straight month and reached their highest level in nine years, according to the National Association of Realtors.
Led by the Northeast and Midwest, all four major regions saw increases in April.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 3.4% to 112.4 in April from a slight upward revision of 108.7 in March and is now 14.0% above April 2014 (98.6) — the largest annual increase since September 2012 (15.1%).
The index has now increased year-over-year for eight consecutive months and is at its highest level since May 2006 (112.5).
“The only time since then that we’ve come close to this level of home contracts written was in April 2010 when the new home tax credit expired (part of the stimulus program),” says Jonathan Smoke, chief economist for realtor.com. “This level of demand is no surprise to us. Our realtor.com activity this spring has been predicting strong sales. And we are seeing the trend continue solidly into May.
“Sales would be even higher if inventory was growing as quickly as demand, but instead we’ve had 32 straight months of the supply of existing homes on the market under 6 months,” he said. “That’s why we’re seeing higher levels of price appreciation this year. That higher level of price appreciation is encouraging more people to consider buying and/or selling and levels of reported foot traffic by Realtors reinforce that. All this bodes well for continued momentum into May and June.”
Lawrence Yun, NAR chief economist, says the steady gains in contract activity each month this year highlight the fact that buyer demand is strong.
"Realtors are saying foot traffic1 remains elevated this spring despite limited — and in some cases severe — inventory shortages in many metro areas," he said. "Homeowners looking to sell this spring appear to be in the driver's seat, as there are more buyers competing for a limited number of homes available for sale."
Following April's decline in existing-home sales, Yun expects a rebound heading into the summer, but the likelihood of meaningful gains will depend on a much-needed boost in inventory and evidence of moderating price growth now that interest rates have started to rise.
"The housing market can handle interest rates well above 4% as long as inventory improves to slow price growth and underwriting standards ease to normal levels so that qualified buyers — especially first-time buyers — are able to obtain a mortgage," he said.
After falling four straight months, the PHSI in the Northeast bounced back solidly (10.1%) to 88.3 in April, and is now 9.4% above a year ago. In the Midwest the index increased 5.0% to 113.0 in April, and is 13.3% above April 2014.
Pending home sales in the South rose 2.3% to an index of 129.4 in April and are 14.8% above last April. The index in the West inched 0.1% in April to 103.8, and is 16.4% above a year ago.
Total existing-home sales in 2015 are forecast to be around 5.24 million, an increase of 6.1% from 2014. The national median existing-home price for all of this year is expected to increase around 6.7%. In 2014, existing-home sales declined 2.9% and prices rose 5.7%.