Pending homes sales soared in February to their highest level since June 2013, according to data released by the National Association of Realtors (NAR) on Monday. The Pending Home Sales Index rose 3.1 percent to 106.9 in February from a slight downward revision of 103.7 in January and is 12 percent about the February 2014 number of 95.4.
The index is at its highest level since June 2013 and has increased year-over-year for six consecutive months. It is above 100, considered an average level of activity, for the 10th consecutive month.
"This is a positive sign heading into the spring homebuying season," Freddie Mac wrote on its blog. "This also shows positive momentum in general for the housing market, since this is the fourth consecutive month pending home sales have been up. If we're going to have the best homes sales this year since 2007, we need homes sales to surpass 2013. Currently, we're running about 7,000 home sales short, non-seasonally adjusted. While existing home sales are down 3 percent, new home sales are up 19 percent compared to 2013 through February. With the strong pending home sales, we're running neck-and-neck through March. April will be the make or break month when we really see the spring homebuying season kick in."
NAR chief economist Lawrence Yun says demand appears to be strengthening 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 4 percent and the likelihood of more renters looking to hedge against increasing rents," Yun said. "These factors bode well for the prospect of an uptick in sales in coming months. However, the underlying obstacle – especially for first-time buyers – continues to be the depressed level of homes available for sale."
According to NAR’s monthly, Realtor’s Confidence Index, the percent share of first-time buyers increased slightly for the first time in February since November 2014, up to 29 percent from 28 percent in January.
"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 said. "The return of first-time buyers this year will depend on how quickly inventory shows up in the market."
The PHSI in the Northeast fell 2.3 percent to 81.7 in February, but is 4.1 percent above a year ago. In the Midwest the index leaped 11.6 percent to 110.4 in February, and is now 13.8 percent above February 2014.
Pending home sales in the South decreased 1.4 percent to an index of 120.2 in February, but is still 10.8 percent above last February. The index in the West climbed 6.6 percent in February to 102.1, the highest it has been since June 2013 at 111.4 and is now 18.3 percent above a year ago.
Total existing-homes sales in 2015 are forecasted to be around 5.25 million, an increase of 6.4 percent from 2014. The national median existing-home price for all of this year is expected to increase around 5.6 percent. In 2014, existing-home sales declined 2.9 percent and prices rose 5.7 percent.