Momentum appears to be building toward a healthy spring market according to data released today on March pending home sales. The National Association of Realtors® (NAR) said its Pending Home Sales Index (PHSI), reached 108.6 in March, a 1.1 percent increase over the previous month. At the same time the February Index number was revised upward from 106.9 to 107.4.
March is the third consecutive month that pending sales have increased month over month and the Index is now at its highest level since June 2013 when it was 109.4. The PHSI was up 11.1 percent from the March 2014 level of 97.7. It has now increased year-over-year for seven consecutive months.
The PHSI is a leading indicator based on executed home purchase contracts. These contracts are generally expected to be reflected in residential sales in about two months.
Lawrence Yun, NAR chief economist, said the encouraging pending sales numbers resulted from more buyers than usual entering this year's competitive spring market. "Demand appears to be stronger in several parts of the country, especially in metro areas that have seen solid job gains and firmer economic growth over the past year," he said. "While contract activity being up convincingly compared to a year ago is certainly good news, the increased number of traditional buyers who appear to be replacing investors paying in cash is even better news. It indicates this year's activity is being driven by more long-term homeowners."
However, he also said that "Demand in many markets is far exceeding supply, and properties in March sold at a faster rate than any month since last summer. This in turn has pushed home prices to unhealthy levels - nearly four or more times above the pace of wage growth in some parts of the country. Simply put, housing inventory for new and existing homes needs to improve measurably to improve affordability."
The PHSI in the Northeast was down (by 1.5 percent) for the fourth straight month to 80.2 but is still 0.6 percent above a year ago. In the Midwest the index declined 2.5 percent to 107.5 but remained 11.3 percent higher than in March 2014.
Pending home sales in the South increased 4.0 percent to an index of 126.5, 12.4 percent above last March. The West was up 1.7 percent for the month and 15.6 percent on an annual basis.