Pending home sales in the United States up solidly in February

Pending home sales in the United States rose solidly in February to their highest level in seven months and remain higher than a year ago, according to the National Association of Realtors.

Led by a sizeable increase in the Midwest, all major regions except for the Northeast saw an increase in contract activity in February, the date from the forward looking index based on contract signings show.

Overall the index rose 3.5% to 109.1 in February from a downwardly revised 105.4 in January and is now 0.7% above February 2015. Although the index has now increased year on year for 18 consecutive months, last month's annual gain was the smallest.

‘After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year1 and a modest, seasonal uptick in inventory,’ said Lawrence Yun, NAR economist.

‘Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what's being scooped up by a growing pool of buyers. Without adequate supply, sales will likely plateau,’ he added.

According to Yun, the one silver lining from last month's noticeable slump in existing home sales was that price appreciation lessened to 4.4% which is still above wage growth but certainly more favourable than the 8.1% annual increase in January.

‘Any further moderation in prices would be a welcome development this spring. Particularly in the West, where it appears a segment of would be buyers are becoming wary of high asking prices and stiff competition,’ Yun pointed out.

Existing homes sales this year are forecast to be around 5.38 million, an increase of 2.4% from 2015. The national median existing home price for all of this year is expected to increase between 4% and 5%. In 2015, existing home sales increased 6.3% and prices rose 6.8%.

A breakdown of the figures show that the index in the Northeast declined 0.2% to 94 in February but is still 12.6% above a year ago. In the Midwest the index shot up 11.4% to 112.6 in February and is now 2.5% above February 2015.

Pending home sales in the South increased 2.1% to an index of 122.4 in February but are 0.4% lower than last February. The index in the West climbed 0.7% in February to 96.4, but is now 6.2% below a year ago.