Pending home sales declined for a second straight month in February, according to the National Association of Realtors’ latest Pending Home Sales Index (PHSI). The forward-looking indicator dropped 10.6% to 110.3, and contract signings fell 0.5% 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. “Demand, interestingly, does not yet appear to be impacted by recent modest rises in mortgage rates.”
Even with rising mortgage costs, rates are expected to remain relatively low at no more than 3.5% in 2021. According to Yun, 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,” continues Yun. “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.”
Each of the four major U.S. regions witnessed month-over-month declines in February, while results were mixed in the four regions year over year.
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. Sales transactions in the South declined 13% to an index of 133.2 in February, up 2.9% from the year prior, and the index in the West fell 7.4% in February to 96.9, up 1.9% from February 2020.
