NAR: Pending Home Sales Grow 1.9% in March

Pending home sales increased in March, snapping two consecutive months of declines, according to the National Association of Realtors®. All but one of the four major U.S. regions experienced month-over-month gains in March, while each area recorded year-over-year growth.

Key Highlights

– Pending home sales increased 1.9% in March after two months of decline.

– Compared to the prior month, pending sales increased nationwide except in the Midwest region.

– Compared to one year ago, pending sales rose by double-digits in all regions.

The Pending Home Sales Index (“PHSI”),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, rose 1.9% to 111.3 in March. Year-over-year, contract signings jumped 23.3%, with the difference due in large part to the pandemic-induced lockdown in March 2020. An index of 100 is equal to the level of contract activity in 2001.

“The increase in pending sales transactions for the month of March is indicative of high housing demand,” said Lawrence Yun, NAR’s chief economist. “With mortgage rates still very close to record lows and a solid job recovery underway, demand will likely remain high.”

“Low inventory has been a consistent problem, but more inventory will show up as new home construction intensifies in the coming months, as well as from a steady wind-down of the mortgage forbearance program,” Yun continued. “Although these moves won’t immediately replenish low supply, they will be a step forward.”

Existing-home sales are projected to rise by 10% in 2021 to reach 6.2 million in 2021, while the median home price is anticipated to increase by 9% in 2021 to $323,900.

Housing starts are forecasted to reach 1.6 million in 2021 and 1.7 million in 2022, providing much-needed relief to the housing inventory deficit. Mortgage rates are expected to modestly climb higher over the next two years, to 3.2% in 2021 and 3.5% in 2022, as inflation rises due to a stronger economy and higher fiscal spending. The economy is anticipated to expand 4.5% in 2021 and 3.5% in 2022.

Realtor.com®’s Hottest Housing Markets(link is external) data revealed that out of the largest 40 metros, the most improved metros over the past year, as of April 14, were Jacksonville, Fla.; Tampa-St. Petersburg-Clearwater, Fla.; Austin-Round Rock, Texas; Riverside-San Bernardino-Ontario, Calif.; and San Antonio-New Braunfels, Texas.

March Pending Home Sales Regional Breakdown

The Northeast PHSI rose 6.1% to 97.9 in March, a 16.7% increase from a year ago. In the Midwest, the index fell 3.7% to 98.6 last month, up 14.1% from March 2020.

Pending home sales transactions in the South jumped 2.9% to an index of 137.2 in March, up 27.9% from March 2020. The index in the West grew 2.9% in March to 94.5, up 29.8% from a year prior.

The National Association of Realtors® is America’s largest trade association, representing more than 1.4 million members involved in all aspects of the residential and commercial real estate industries.

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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales are not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues. The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

NOTE: Existing-Home Sales for April will be reported May 21. The next Pending Home Sales Index will be May 27; all release times are 10:00 a.m. ET.

Source: National Association of Realtors