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Pending home sales posted their third-straight monthly gain in February as prices cooled, according to new data.
Data released on Wednesday, by the National Association of Realtors, shows that the Pending Home Sales Index climbed 0.8 percent in February to a score of 83.2 — but remained down 21.1 percent from where it stood a year ago.
“After nearly a year, the housing sector’s contraction is coming to an end,” NAR Chief Economist Lawrence Yun said in a statement. “Existing-home sales, pending contracts and new-home construction pending contracts have turned the corner and climbed for the past three months.”
Contract signings increased in all United States regions except for the West. The index for the Northeast climbed 6.5 percent to a reading of 72.5 percent, down 17 percent from a year ago — while the Midwest index improved 0.4 percent to 84.9, a decline of 16.5 percent from 2022 levels.
Contract signings in the South climbed 0.7 percent to 99.3 in February, 21.7 percent lower than they were last year, while the West saw signings decline 2.4 percent to a score of 64.6 — 28.4 percent lower than their February 2022 levels.
“The affordable U.S. regions – the Midwest and South – are leading the recovery,” Yun said. “Mortgage rates have improved in recent weeks after the federal government guaranteed the status of most mortgages amidst uncertainty in the financial market. While access to commercial mortgage loans could become increasingly difficult, residential mortgage loans are expected to be more readily available.”
Pending home sales provide a forward-looking indicator of where home sales are expected to be in roughly a month, based on contract signings. A home is listed as pending when a contract has been signed but the transaction has not yet been completed.
The slight pick up in contract signings suggests that the uptick in home sales recorded during February was not a one-off, experts said, as price decreases bring more buyers into the market who had been locked out due to record-high mortgage rates and prices.
February also saw a record-long streak of year-over-year price increases end, with the median existing-home sale price decreasing 0.2 percent annually to $363,000, according to NAR data.
“Because contract signings precede home sales, today’s data suggest that February’s pick-up in home sales may not be a one-off, especially as home sales prices have begun to ease in response to the affordability hurdles the combo of high rates and home prices presents,” Realtor.com Chief Economist Danielle Hale said in a statement.
“In the big picture, this improvement is one to celebrate, but with nationwide pending sales lagging behind year-ago levels by 21.1 percent and regional pending sales down 17 percent to 28 percent from a year ago, the improvement is going to be gradual.”