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Pending home sales: Low rates mitigating home price ‘sting’

March's PHSI shows a promising spring buying season -- NAR chief economist explains why
  • March's PHSI is 110.5, a 1.4 percent month-over-month and year-over-year increase.
  • NAR's Chief Economist, Lawrence Yun, says March's PHSI shows a promising beginning to the spring buying season.
  • The Northeast experienced a 3.2 percent month-over-month increase and 18.4 percent year-over-year increase to an index of 97.0. The West was in last place with a 1.8 percent month-over-month and 7.9 year-over-year decline.

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The National Association of Realtors (NAR) released its March Pending Home Sales Index, a forward-looking indicator based on contract signings. March’s PHSI is part of a two-month upward trend and is the highest PHSI in almost a year.

Pending home sales rose 1.4 percent month-over-month to 110.5 from February’s downwardly revised 109.0 and rose 1.4 percent year-over-year from March 2015. Furthermore, March’s gains are part of a 19-month trend of year-over-year increases.

Source: NAR

Source: NAR

“Despite supply deficiencies in plenty of areas, contract activity was fairly strong in a majority of markets in March,” said NAR Chief Economist Lawrence Yun in a press release. “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.”

Pending Home Sales Index by region

The Northeast led the way with a 3.2 percent month-over-month and 18.4 percent year-over-year increase to an index of 97.0.

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The South followed closely behind with a 3.0 percent month-over-month increase to an index of 125.4, and a 0.6 percent year-over-year decrease.

The Midwest experienced a minimal 0.2 percent month-over-month and 4.0 year-over-year increase to an index of 112.8.

Lastly, the West took a hit in March with a 1.8 percent month-over-month and 7.9 year-over-year decrease to an index of 95.3.

“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,” says 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.”

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