After increasing 3.5% in February, pending home sales increased a weaker 1.4% in March to reach a score of 110.5 on the National Association of Realtors’ (NAR) Pending Home Sales Index.
Not only is that the second consecutive month that the index increased, but it’s also the highest level of pending home sales since May 2015, NAR says in a release.
“Despite supply deficiencies in plenty of areas, contract activity was fairly strong in a majority of markets in March,” says Lawrence Yun, chief economist for NAR, in a release. “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.”
Pending home sales were up 1.4% compared with March 2015.
Looking at activity by region, pending home sales increased 3.2% in the Northeast, 3.0% in the South and 0.2% in the Midwest. They decreased 1.8% in the West.
NAR says in the short term, a healthy labor market and favorable borrowing costs should lead to sustained buyer demand and a durable pace of sales.
However, Yun says 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 percent in the past three years,” Yun says. “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.”