Overcoming several roadblocks in housing, pending home sales managed to increase in March for the second consecutive month, reaching their highest level in almost a year, according to the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, grew 1.4% to 110.5 in March from an downwardly revised 109.0 in February. This is also 1.4% above March 2015 (109.0).
With this new reading, the index has increased year-over-year for 19 consecutive months and is at its highest reading since May 2015 (111.0).
Last month, pending home sales beat expectations and grew to the highest level in seven months.
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.”
Broken up regionally, Yun said, “Demand is starting to weaken in some areas, particularly in the West, where the median home price has risen an astonishing 38% in the past three years.”
“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,” he added.
The PHSI in the Northeast increased 3.2% to 97.0 in March, and is now 18.4% above a year ago. In the Midwest the index inched up a slight 0.2% to 112.8 in March, and is now 4.0% above March 2015, while the South the index rose 3.0% to 125.4 in March but is still 0.6% lower than last March. The index in the West fell 1.8% in March to 95.3, and is now 7.9% below a year ago.
The most recent new-home sales report also touched on what is happening on the West Coast.
“So far this year, much of the softness in national new home sales numbers has been driven by weakness in the West region. In both January and March, new home sales in the West fell more than 20% month-over-month. Some, but not all, of this slack has been picked up in other areas of the country: Over the year, new home sales are down 20.7% in the West, but up 15.4% in the South,” Zillow Chief Economist Svenja Gudell said about the new home sales report.
“The West region is home to some of the nation's priciest and fastest-growing housing markets, and continued weakness could indicate some fatigue among homebuyers who need a breather from breakneck appreciation,” she continued.