There aren’t enough homes listed, marking the second monthly decline in a row. Only upper-end houses had more pending home-sale contracts, says NAR economist.
WASHINGTON – Pending home sales dipped for a second straight month in February, according to the National Association of Realtors® (NAR). Each of the four major U.S. regions tracked by the report saw month-over-month declines, though results were mixed in the four regions year-over-year.
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – dropped 10.6% to 110.3 in February. Year-over-year, contract signings fell 0.5%. An index of 100 is equal to the level of contract activity in 2001.
“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. “Only the upper-end market is experiencing more activity because of reasonable supply. Demand, interestingly, does not yet appear to be impacted by recent modest rises in mortgage rates.”
According to Yun, even with current rising mortgage costs, rates are still expected to remain relatively low at no more than 3.5% in 2021. He says it’s still advantageous to both prospective buyers and current homeowners contemplating refinancing to take advantage of mortgage rates that remain historically low.
Nationally, homes priced above $250,000 have largely been driving home sales for the last several months. However, Yun says that even homes priced above $500,000 and 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,” Yun says. “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.”
February pending home sales regional breakdown: 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.
Pending home sales transactions in the South declined 13.0% to an index of 133.2 in February, but in the area that includes Florida, they’re up 2.9% year-to-year. The index in the West fell 7.4% in February to 96.9, but that’s also up by 1.9% from a year prior.
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