Pending home sales bounced back in March, after a minor slip in February.
The Pending Home Sales Index (PHSI), reported by the National Association of Realtors (NAR), is a forward-looking indicator based on signed contracts. The PHSI rose 3.8% from 101.9 in February to 105.8 in March, but was still 1.2% below the level one year ago, marking the fifteen straight month of declines on an annualized basis.
Regionally, only the Northeast saw a decline in the PHSI. The PHSI in the Midwest, South and West grew 2.3%, 4.4% and 8.7% in March, while sales in the Northeast declined 1.7%. Year-over-year, the PHSI fell in the Northeast, Midwest and West by 0.4%, 5.0% and 1.6%, but rose 0.7% in the South.
Despite volatility over the past several months, the March strong gain shows consumers’ positive sentiment in homebuying, as mortgage applications grow steadily and mortgage rates decline again in March. But, compared to sales in 2000, NAR suggests the current sales activity is underperforming and demand in housing market is still repressed. Thus, NAR expects sales will continue to grow in the coming quarters and years.
Moderated home prices and stabilized builder confidence also provide favorable conditions to the housing market. The Case-Shiller U.S. National Home Price Index, released earlier today, saw a slower growth pace in February. Meanwhile, builder confidence rose one point to 63 in April, suggesting a solid demand for new single-family homes even though affordability is still a problem due to labor shortages and costly building materials.