Pending home sales improved in March, shattering two consecutive months of declines, according to the National Association of Realtors’ latest Pending Home Sales Index (PHSI). The indicator rose 1.9% to 111.3, and contract signings jumped 23.3% year over year, with the difference due to the pandemic-induced lockdown in March 2020.
Existing-home sales are projected to rise by 10% in 2021 to reach 6.2 million, while the median home price is anticipated to increase by 9% to $323,900, according to the NAR.
“The increase in pending sales transactions for the month of March is indicative of high housing demand,” says Lawrence Yun, NAR’s chief economist. “With mortgage rates still very close to record lows and a solid job recovery underway, demand will likely remain high.”
Housing starts are forecasted to reach 1.6 million in 2021 and 1.7 million in 2022, providing much-needed relief to housing inventory. Mortgage rates are expected to modestly climb higher over the next two years, to 3.2% in 2021 and 3.5% in 2022, as inflation rises due to a stronger economy and higher fiscal spending.
“Low inventory has been a consistent problem, but more inventory will show up as new-home construction intensifies in the coming months, as well as from a steady wind-down of the mortgage forbearance program,” continues Yun. “Although these moves won’t immediately replenish low supply, they will be a step forward.”
All but one of the four major U.S. regions experienced month-over-month gains in March, while each area recorded year-over-year growth.
The Northeast PHSI rose 6.1% to 97.9 in March, a 16.7% increase from a year ago. In the Midwest, the index fell 3.7% to 98.6 last month, up 14.1% from March 2020. Sales transactions in the South jumped 2.9% to an index of 137.2, up 27.9% from March 2020, and the index in the West grew 2.9% in March to 94.5, up 29.8% from a year prior.
