Pending home sales in February bounced back to their second-highest level since May 2006 and the highest since last April, according to the National Association of Realtors. All major regions throughout the US saw a notable hike in contract activity.
“Buyers came back in force last month as a modest, seasonal uptick in listings were enough to fuel an increase in contract signings throughout the country,” NAR’s chief economist Lawrence Yun said.
“The stock market’s continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year,” he added.
Pending home sales is a leading indicator for the housing sector. “Pending” is defined when the contract has been signed but the transaction has yet to close. Sales are usually finalized within one or two months of signing the contract.
Yun said he continues to expect ebbs and flows in home-buying activity with high demand and limited supply of new homes. Lower- and mid-markets, in particular, are facing a crisis because of limited housing supply. Moreover, home prices are rising because of multiple offers, according to NAR’s press release.
“The homes most buyers are in the market for are unfortunately the most difficult to find and ultimately buy. The country’s healthy labor market is translating to greater job security, but affordability is not improving because home prices in some areas are still outpacing incomes by three times or more because of tight supply,” he said.
“How much new and existing inventory there is on the market this spring will determine if sales can reach their full potential and finally start reversing the nation’s low homeownership rate.”
With the US homeownership rate falling in the fourth quarter to 63.7% (after hitting a five-decade low of 62.9%) — remaining below the historical average of 65% — it’s clear that Americans are eager to purchase homes. There’s just not enough inventory to choose from.
Melody Hahm is a writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Follow her on Twitter @melodyhahm.