Pending home sales increased 2.0% in February compared with January however they were down 3.6% compared with February 2024, according to the National Association of Realtors (NAR).
Regionally, and month-over-month, pending home sales fell 2.5% in the Northeast and 3.0% in the West, but were up 0.7% in the Midwest and 6.2% in the South.
Year-over-year, contract signings dropped in all four U.S. regions, with the Midwest undergoing the greatest reduction.
“Despite the modest monthly increase, contract signings remain well below normal historical levels,” says Lawrence Yun, chief economist for NAR, in a statement. “A meaningful decline in mortgage rates would help both demand and supply – demand by boosting affordability, and supply by lessening the power of the mortgage rate lock-in effect.”
“Considering the Federal Reserve’s recent forecast for slower economic growth, we expect mortgage rates to slide moderately lower,” Yun says. “But the current high national debt will prevent mortgage rates from falling drastically – and certainly not to the 4 percent to 5 percent range seen during President Trump’s first term.”
NAR forecasts mortgage rates will average 6.4% in 2025 and 6.1% in 2026. The association expects existing-home sales will rise by 6% in 2025 and accelerate another 11% in 2026. The new-home sales market has plentiful inventory and, therefore, NAR anticipates it will rise by 10% in 2025 and another 5% in 2026. It predicts that the national median home price will increase by 3% in 2025 and 4% in 2026.
“Home price growth will moderate due to more supply coming onto the market,” Yun adds. “Having income and wages rise faster than home prices are welcome to improve affordability.”
In a separate statement, Sam Williamson, senior economist at First American, says higher mortgage rates, high home prices and lack of inventory means the spring home-buying season is off to a slow start.
“While pending home sales exceeded expectations in February, they are hovering near historical lows, signaling a slow start to the busy spring home-buying season,” Williamson says. “Purchase mortgage applications – another leading indicator of housing activity – rebounded slightly in March, but also remain well below historical levels.”
“Affordability remains a significant hurdle for buyers, although certain regions are seeing some relief due to growing inventory,” Williamson says. “While pending home sales decreased in the Northeast and West last month, the Midwest and South reported gains. The South, in particular, has benefitted from new residential construction, which has boosted supply and improved affordability in these areas. Additionally, more listings are showing price reductions, and homes are lingering longer on the market, signaling potential respite for buyers even as mortgage rates hold steady.”
“Heading into spring, a modest seasonal increase in home-buying activity is expected,” Williamson adds. “Nevertheless, challenges like affordability constraints and the ongoing rate lock-in effect continue to weigh heavily compared to the dynamics of pre-pandemic spring markets.”
Photo: Scott Webb