Pending home sales in the United States continued to maintain their recent high level in March but momentum slackened slightly in most of the country, the latest index data shows.
A severe lack of supply is affecting the market with only the south seeing a rise in contract signings in March, according to the pending home sales index from the National Association of Realtors (NAR).
The index fell by 0.8% in March month on month but is still 0.8% above a year ago and activity was still strong enough to be the third best in the past year. But prices are rising, up 6.8% with 42% of homes sold at or above their asking price.
According to Lawrence Yun, NAR chief economist potential buyer are competing with each other in the more affordable sectors of the housing market.
‘In most areas, the lower the price of a home for sale, the more competition there is for it. That’s the reason why first time buyers have yet to make up a larger share of the market this year, despite there being more sales overall,’ he said.
But Yun is concerned that the painfully low supply levels this spring could heighten price growth which reached 6.8% in March with even higher levels of growth in the months ahead.
‘Sellers are in the driver’s seat this spring as the intense competition for the few homes for sale is forcing many buyers to be aggressive in their offers. Buyers are showing resiliency given the challenging conditions. However, at some point, and the sooner the better, price growth must ease to a healthier rate. Otherwise sales could slow if affordability conditions worsen,’ Yun explained.
The forecasts for existing home sales is to be around 5.64 million this year, an increase of 3.5% from the 5.45 million recorded in 2016. The national median existing home price this year is expected to increase around 5%. This compared to rise in existing sales if 3.8% and in pries of 5.1% in 2016.
A breakdown of the figures shows that the index decreased 2.9% in the Northeast but is still 1.8% above a year ago and fell 1.2% in the Midwest and now 2.4% lower than March 2016.
Pending home sales in the South rose 1.2% and are now 3.9% above last March while they fell by 2.9% in the West and are 2.7% below a year ago.
