The number of contracts signed to buy previously-owned homes ticked up in March to hit a new 22-month peak, reaching its highest level since June 2013, thanks to gains in the West and South, the National Association of Realtors said Wednesday.
NAR’s Pending Home Sales Index, which tracks contract signings (as opposed to closed sales), rose 1.1% in March to a level of 108.6, from an upwardly revised February level of 107.4. (An index of 100 represents an average level of contract activity.) That level was 11.1% higher than in March 2014, when the index stood at 97.7, and marks the seventh straight month of year-over-year gains. March’s index is at its highest level since June 2013, when the measure stood at 109.4, and just beat expectations of economists surveyed by Bloomberg Bloomberg ahead of the release.
“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,” said Lawrence Yun, NAR’s chief economist. “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.” A recent separate report from NAR showed that sales to investors were 15% of sales in the first quarter of 2015, down from 19% during the first quarter of 2014. All cash sales comprised 26% of transactions in the first quarter of 2015, down from 33% in the first quarter of 2014.
Though price acceleration is slowing down according to the latest report from SP/Case-Shiller, which tracks home sales price growth, Yun noted that an imbalance in supply and demand continues to push prices higher.
“Demand in many markets is far exceeding supply, and properties in March sold at a faster rate than any month since last summer,” he said. “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.”
But the rising number of contracts for previously-owned homes suggests that as prices moderate, people are buying homes. March’s index read continues a change in the market that began last September. Before that month, contract signings had been down on a year-over-year basis since September 2013, as quickly rising prices slowed the pace at which Americans were purchasing homes. As price gains slowed down and investors exited the market, contract signings have crept up.
Overall, reports released in April show a housing market that is mostly back to normal. Construction starts rose by 2% in March compared to February, and were 2.5% lower than the groundbreaking rate in March 2014, according to Commerce. A report last week showed that March sales of previously-owned homes rose 6.1% to hit their highest level in 18 months as inventory eased. Prices for previously-owned homes single family homes appreciated 4.2% year-over-year in February (the most recent data available from SP/Case-Shiller), continuing a more than year-long slowdown.
Today’s pending home sales report is considered a more timely pulse of the market than other reports because it is forward-looking, based on contracts signed rather than closed transactions. (Closings generally come one to two months after a contract is signed.)
Pending contracts for existing-homes varied by region in March, with gains in the West and South offset by declines in the Northeast and Midwest. The Western region’s index climbed 1.7% in March to 103.7, while the Southern index rose by 4% to 126.5. Meanwhile, the index tracking pending contracts in the Northeast fell 1.5% in March from February to 80.2, and the Midwest index declined 2.5% in March to 107.5.
On a year-over-year basis, all regions of the United States increased contract signings in February: the Northeast by 0.6%, South by 12.4%, Midwest by 11.3%, and West by 15.6%.
The national median sales price for existing, or previously-owned, homes for 2014 rose 5.7% to $208,100. That level of price appreciation is much steadier than the rapid, 11.5% gain for 2013. In 2015, NAR expects the national median existing-home prices to rise about 5%. Total Total existing-home sales for 2015 are forecast to be around 5.25 million, or about 6.4% above 2014. Last year sales finished 2.9% below 2013 levels (5.1 million) at 4.94 million, while prices rose 5.7%.