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Homebuyers are making a cautious comeback, with pending home sales seeing a modest boost in February, according to data released Thursday by the National Association of Realtors (NAR).
However, challenges remain, and experts say lower mortgage rates are crucial for stronger recovery.
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The Pending Home Sales Index (PHSI), which tracks contract signings to indicate future home sales, rose by 2.0 percent to 72.0 last month. Compared to last year, contract signings were down 3.6 percent.
NAR Chief Economist Lawrence Yun pointed out that while February’s uptick is a positive sign, contract signings are still well below historical norms. He emphasized that lower mortgage rates are essential to reviving demand.
Lawrence Yun | Chief economist at the National Association of Realtors
“A meaningful decline in mortgage rates would help both demand and supply — demand by boosting affordability, and supply by lessening the power of the mortgage rate lock-in effect,” Yun explained.
However, Yun also noted that high national debt will likely prevent mortgage rates from dropping significantly. While the Federal Reserve expects rates to ease, they are unlikely to return to the 4 percent to 5 percent range seen during President Trump’s first term.
Looking ahead, NAR forecasts mortgage rates will average 6.4 percent in 205 and 6.1 percent in 2026. Meanwhile, median home prices are expected to increase by 3 percent in 2025 and 4 percent in 2026, though an increase in housing supply could help moderate price growth.
“Having income and wages rise faster than home prices are welcome to improve affordability,” Yun added.
Pending home sales varied by region, with the Midwest and South showing monthly improvements, while the Northeast and West saw declines. Year-over year, pending home sales declined across all four regions.
- Midwest: Sales increased 0.7 percent to 73.3, down 4.7 percent from February 2024.
- South: Sales rose 6.2 percent to 86.0, a decline of 3.4 percent from last year.
- Northeast: Sales decline 0.9 percent to 62.8, down 2.5 percent from the previous year.
- West: Sales rebounded 3.0 percent to 55.9, down 3.5 percent from last year.
Sam Williamson | First American Senior Economist
Despite affordability concerns, some areas are benefitting from growing inventory. First American Senior Economist Sam Williamson noted that the South, in particular, has seen a boost in supply.
“More listings are showing price reductions, and homes are lingering longer on the market, signaling potential respite for buyers even as mortgage rates hold steady.”
