The report is a good omen for the spring homebuying season.
Pending home sales rose 0.8% in February, the third consecutive month of improvement as the housing market grapples with high mortgage rates, elevated prices and a limited supply of houses for sale, the National Association of Realtors said on Wednesday.February’s gain follows January’s 8.1% increase, when unseasonably warm weather and a dip in mortgage rates encouraged buyers to come out in force. However, contracts for future purchases are still 21% below the levels of a year ago.
“After nearly a year, the housing sector’s contraction is coming to an end,” said NAR Chief Economist Lawrence Yun. “Existing-home sales, pending contracts and new-home construction pending contracts have turned the corner and climbed for the past three months.”
Three of the nation’s four regions saw increasing sales, with only the West registering a drop.
“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,” Yun added.
Although there have been conflicting accounts of the health of the consumer, Wells Fargo economists noted in a report on Wednesday that Americans are still sitting on about $800 million in excess savings built up during the coronavirus pandemic. And while many homeowners are sitting on mortgages that are about half the rate of today’s new mortgages, making them unwilling to sell, there are some indications that buyers and sellers are getting closer in their expectations.
“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,” Danielle Hale, chief economist for Realtor.com, said ahead of the report’s release.
One fly in the ointment is the banking crisis that has emerged in recent weeks following the collapse of Silicon Valley Bank and two other financial institutions. But federal regulators told the Senate Banking Committee on Tuesday that the system remained safe and sound and that outflows of deposits have stabilized.