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Pending home sales are on the rise nationwide, finishing off February at a seven-month high and remaining higher than a year ago, according to a new report by National Association of Realtors. With the Midwest leading the way, all regions except the Northeast saw an increase in contract activity in February.
NAR’s pending-home index is a forward-looking indicator based on purchase agreements that are currently under contract and expected to close. The index rose 3.5 percent in February to 109.1. That’s up from January’s 105.4. Although the index has now increased year-over-year for 18 consecutive months, last month's annual gain was the smallest.
NAR Chief Economist Lawrence Yun called the gains “promising.”
“After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year and a modest, seasonal uptick in inventory,” he said. “Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what's being scooped up by a growing pool of buyers. Without adequate supply, sales will likely plateau.”
According to Yun, the one silver lining from last month's noticeable slump in existing-home sales was that price appreciation lessened to 4.4 percent, which is still above wage growth but certainly more favorable than the 8.1 percent annual increase in January.
"Any further moderation in prices would be a welcome development this spring," adds Yun. "Particularly in the West, where it appears a segment of would-be buyers are becoming wary of high asking prices and stiff competition."
Existing-homes sales this year are forecast to be around 5.38 million, an increase of 2.4 percent from 2015. The national median existing-home price for all of this year is expected to increase between 4 and 5 percent. In 2015, existing-home sales increased 6.3 percent and prices rose 6.8 percent.