Pending homes sales in the US rise but still well below a year ago
Pending home sales increased month on month in the United States in February but weakening affordability and not enough inventory on the market restricted overall activity compared to a year ago.
Sales increased by 3.1% but activity is still 4.1% below where it was in February 2017, which was the second highest in over a decade, according to the latest index report from the National Association of Realtors (NAR).
‘The expanding economy and healthy job market are generating sizeable home buyer demand, but the miniscule number of listings on the market and its adverse effect on affordability are squeezing buyers and suppressing overall activity,’ said Lawrence Yun, NAR chief economist.
He predicts that there will be ongoing volatility in the Northeast region at least through March and added that overall both buyers and potential sellers are having to adjust to the steady climb in mortgage rates since late last year.
He explained that prospective buyers continue to feel the strain of swift price growth, up 5.9% so far in 2018, and the higher borrowing costs will only add to the pressures placed on their budget.
Meanwhile, more would-be sellers are putting off listing their home for sale out of uneasiness of losing their low mortgage rate, especially if they refinanced in recent years and this is adding to the lack of supply in the housing market, according to Yun.
‘Even if new home construction starts picking up at a faster pace this year, as expected, existing sales will fail to break out if these record low supply levels do not recover enough to meet demand,’ he said.
For the year, Yun now forecasts existing home sales are likely to be flat while the national median existing home price is expected to increase around 4.2%. In 2017, existing sales increased 1.1% and prices rose 5.8%.
A breakdown of the index figures show that in the North East sales increased by 10.3% but are still 5.1% below a year ago while in the Midwest sales rose just 0.7% and 9.5% lower than February 2017.
Pending home sales in the South rose 3% but are 1.5% lower than February last year while in the West sales rose by 0.4% but are 2.2% lower than they were a year ago.