Pending home sales rose a modest 3.1% in February compared to January and were up 12.0% compared to February 2014, according to the National Association of Realtors (NAR).
The increase comes after a month-over-month jump of about 4.5% in January compared to December.
Gains in the Midwest and the West offset smaller declines in the Northeast and the South, according to the firm's Pending Home Sales Index.
Lawrence Yun, chief economist for NAR, says strong demand will likely result in higher sales as we head into the spring buying season.
‘Pending sales showed solid gains last month, driven by a steadily improving labor market, mortgage rates hovering around four percent and the likelihood of more renters looking to hedge against increasing rents,’ Yun says in a release. ‘These factors bode well for the prospect of an uptick in sales in coming months.’
Tighter-than-normal inventory, however, remains an obstacle for first-time and lower-income buyers, Yun says.
The percent share of first-time buyers increased to 29% in February – the first time it had increased since November 2014, when it was 28%.
‘Several markets remain highly competitive due to supply pressures, and Realtors are reporting severe shortages of move-in ready and available properties in lower price ranges,’ Yun says. ‘The return of first-time buyers this year will depend on how quickly inventory shows up in the market.’
NAR forecasts that existing-home sales will reach around 5.25 million this year, up 6.4% from 2014. The firm also forecasts that home prices will increase around 5.6%.
In 2014, existing-home sales declined 2.9% and prices rose 5.7% compared to the previous year.