Pending home sales in the United States increased slightly in March for the second consecutive month and reached their highest level in almost a year, according to the latest index.
The Pending Home Sales Index from the National Association of Realtors, a forward looking indicator based on contract signings, increased by 1.4% in March and is now 1.4% above March 2015.
It means that after the slight gain, the index has increased year on year for 19 consecutive months and is at its highest reading since May 2015 and Lawrence Yun, NAR chief economist, said it signals a solid beginning to the spring buying season.
‘Despite supply deficiencies in plenty of areas, contract activity was fairly strong in a majority of markets in March. This spring’s surprisingly low mortgage rates are easing some of the affordability pressures potential buyers are experiencing and are taking away some of the sting from home prices that are still rising too fast and above wage growth,’ he explained.
He also pointed out that in the short term, the healthy labour market and favourable borrowing costs should lead to sustained buyer demand and a durable pace of sales. However, Yun he believes that the consequences from a failure to construct more single family homes in recent years are starting to impact some top job producing markets, where endless supply shortages continue to limit choices for buyers and are driving up prices beyond what a growing share of households can comfortably afford.
‘Demand is starting to weaken in some areas, particularly in the West, where the median home price has risen an astonishing 38% in the past three years. As a result, pending sales in the region have now declined in four of the last five months and are lower than one year ago for the third month in a row. Closed sales in the region in March were also below last year’s pace,’ Yun said.
A breakdown of the figures show that the index in the Northeast increased 3.2% and is now 18.4% above a year ago while in the Midwest the index inched up 0.2% but is now 4% above March 2015.
Pending home sales in the South rose 3% but are still 0.6% lower than last March and the index in the West declined 1.8% in March and is now 7.9% below a year ago.
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