Pending home sales jumped 5.5% in February to reach the highest level in nearly a year and the second-highest level in over a decade, according to the National Association of Realtors (NAR).
The jump resulted in a score of 112.3 on NAR’s Pending Home Sales Index – up from 106.4 in January.
It was the highest index score since last April (113.6) and the second highest since May 2006 (112.5).
Pending home sales were up 2.6% compared with February 2016, according to the report.
In general, pending home sales increase in the early spring and decrease in the fall, so February’s increase is in keeping with the usual trend. Still, it is a relief for professionals in the real estate and mortgage industries who have been wondering for months if rising interest rates, limited supply and rising home prices would put a damper on spring home sales.
“Buyers came back in force last month, as a modest, seasonal uptick in listings were enough to fuel an increase in contract signings throughout the country,” says Lawrence Yun, chief economist for NAR, in a statement. “The stock market’s continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year.”
Yun adds that because it was the warmest February in decades, prospective home buyers may have begun their house hunting early, resulting in more contract signings.
Looking ahead to the busy spring months, Yun expects to see continued ebbs and flows in activity as new supply struggles to replace listings that are going under contract at a very quick pace. This is especially the case at the lower- and mid-market price ranges, where choices are minimal and prices are being bid higher by multiple offers.
“The homes most buyers are in the market for are unfortunately the most difficult to find and ultimately buy,” he says. “The country’s healthy labor market is translating to greater job security, but affordability is not improving because home prices in some areas are still outpacing incomes by three times or more because of tight supply. How much new and existing inventory there is on the market this spring will determine if sales can reach their full potential and finally start reversing the nation’s low homeownership rate.”
Currently, NAR is forecasting that existing-home sales will reach 5.57 million this year – an increase of 2.3% compared with about 5.45 million in 2016.
The national median existing-home price this year is expected to increase around 4%.
In 2016, existing-home sales increased 3.8%, and prices rose 5.1%, according to NAR’s data.