US pending home sales rose for a third consecutive month in February, up 0.8% month-over-month to the highest level since August, following an 8.1% jump in January. The sales number was way ahead of market forecasts of a 2.3% fall. Pending home sales were up in the Northeast (6.5%), the South (0.7%) and the Midwest (0.4%) but fell in the West (-2.4%). For perspective year-on-year, pending home sales are down 21.1%. In February however we saw a resurgence in mortgage rates which could delay a much-awaited housing market turnaround. We had seen in the weekly mortgage applications reports that the pullback in mortgage rates has spurred some renewed demand among home buyers.
The median new home price fell by 0.7% y/y to $427,500: the first decline since August 2020. Months’ supply fell from 8.7 to 7.9.
National Association of Realtors® Pending Home Sales
February 2023 Highlights
- Pending Home Sales (M/M) Feb: 0.8% (exp -3.0%; prev 8.1%)
- Pending Home Sales NSA (Y/Y) Feb: -21.1% (prev -22.4%)
Pending Home Sales by Region
- Northeast PHSI raised 6.5% from last month to 72.5, a drop of 17% from February 2022.
- Midwest index improved 0.4% to 84.9 in February, a decline of 16.5% from one year ago.
- South PHSI grew 0.7% to 99.3 in February, dropping 21.7% from the prior year.
- West index decreased 2.4% in February to 64.6, shrinking 28.4% from February 2022.
- “The affordable U.S. regions – the Midwest and South – are leading the recovery,”
“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”, said NAR Chief Economist Lawrence Yun.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) fell by 3bps to 6.45% in the week ended March 24th 2023, declining for a third consecutive week and to the lowest level since mid-February, data from the Mortgage Bankers Association showed.
“While the 30-year fixed rate remained 1.65 percentage points higher than a year ago, homebuyers responded, leading to a fourth straight increase in purchase applications”, MBA Vice President and Deputy Chief Economist Joel Kan said
About Pending Home Sales
*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.
The index is based on a sample that covers about 40% of multiple listing service data each month. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
From The TradersCommunity News Desk