Pending home sales were down for a second straight month in February, with the National Association of Realtors’ Pending Home Sales Index (PHSI) dropping 10.6% to 110.3.
Each of the four major U.S. regions witnessed month-over-month declines, while results were mixed in the four regions year-over-year.
“The demand for a home purchase is widespread, multiple offers are prevalent and days-on-market are swift but contracts are not clicking due to record-low inventory,” says Lawrence Yun, NAR’s chief economist. “Only the upper-end market is experiencing more activity because of reasonable supply. Demand, interestingly, does not yet appear to be impacted by recent modest rises in mortgage rates.”
According to Yun, even with rising mortgage costs, rates are expected to remain relatively low at no more than 3.5% in 2021. He says the rates are still advantageous to both prospective buyers and to current homeowners who are contemplating refinancing.
Nationally, homes priced at above $250,000 have largely been driving home sales for the last several months. However, Yun indicates that even homes priced above $500,000 to less than $1 million are subject to the same low-inventory dilemma.
“Potential buyers may have to enlarge their geographic search areas, given the current tight market,” Yun says. “If there were a larger pool of inventory to select from – ideally a five- or a six-month supply – then more buyers would be able to purchase properties at an affordable price.”
The Northeast PHSI fell 9.2% to 92.3 in February – a 3.9% dip from a year ago. In the Midwest, the index dropped 9.5% to 102.4 last month, down 6.1% from February 2020.
Pending home sales transactions in the South declined 13.0% to an index of 133.2 in February, up 2.9% from February 2020. The index in the West fell 7.4% in February to 96.9, up 1.9% from a year prior.
Photo by Stephen Wheeler