The National Association of Realtors’ Pending Home Sales Index gained 0.4% to 107.6 in March from a downwardly revised 107.2 in February, the group reported Monday. Still, owing to constrained inventory, the index fell 3% from a year earlier, the third straight month of year-over-year decline.
The PHSI in the Northeast fell 5.6% to 90.6 in March, and is now 8.1% below a year ago. In the Midwest the index rose 2.4% to 101.3 in March, but is 6.0% lower than March 2017. Pending home sales in the South climbed 2.5% to an index of 128.6 in March, and are 0.3% higher than last March. The index in the West declined 1.1% in March to 94.7, and is 2.2% below a year ago.
Lawrence Yun, NAR chief economist, said contract activity is moving sideways and not breaking higher despite the strong job-creating economy. “Healthy economic conditions are creating considerable demand for purchasing a home, but not all buyers are able to sign contracts because of the lack of choices in inventory,” he said. “Steady price growth and the swift pace listings are coming off the market are proof that more supply is needed to fully satisfy demand. What continues to hold back sales is the fact that prospective buyers are increasingly having difficulty finding an affordable home to buy.”
Added Yun, “As anticipated, the multiple winter storms and unseasonably cold weather contributed to the decrease in contract signings in the Northeast.”
Looking ahead to the upcoming peak months for home sales, Yun believes that affordability will be a significant topic of discussion and driving factor of whether overall activity can break out above year ago levels. Price appreciation in most markets continues to outpace incomes, and the recent uptick in mortgage rates to over a four-year high only adds to the budget constraints aspiring buyers are feeling this spring.
“Much of the country is enjoying a thriving job market, but buying a home is becoming more expensive,” said Yun. “That is why it is an absolute necessity for there to be a large increase in new and existing homes available for sale in coming months to moderate home price growth. Otherwise, sales will remain stuck in this holding pattern and a growing share of would-be buyers – especially first-time buyers – will be left on the sidelines.”
Yun forecasts for existing-home sales in 2018 to be around 5.51 million – flat with 2017. The national median existing-home price is expected to increase around 4.4%. In 2017, existing sales increased 1.1% and prices rose 5.8%.
