Pending home sales dip due to low inventory
For the second straight month, the Pending Home Sales Index (PHSI) slid—dropping 10.6% to an index of 110.3 in February—with year-over-year contract signings falling 0.5%. For context, an index of 100 is equal to 2001’s level of contract activity.
“The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market are swift, but contracts are not clicking due to record-low inventory,” says Lawrence Yun, the National Association of Realtors® (NAR’s) chief economist.
“Only the upper-end market is experiencing more activity because of reasonable supply,” Yun continues. “Demand, interestingly, does not appear to be impacted by recent modest rises in mortgage rates.”
Predictions for the months ahead
Yun expects rates to remain relatively low, predicting they hover at 3.5% or below for all of 2021, which is still considered favorable for both homebuying and refinancing. Inventory remains a concern, however.
“Potential buyers may have to enlarge their geographic search areas, given the current tight market,” says Yun. “If there were a larger pool of inventory to select from—ideally a five- or a six-month supply—then more buyers would be able to purchase properties at an affordable price.”
The hot spots
According to Realtor.com®’s Housing Market Recovery Index, the following areas have seen the greatest recovery:
- Austin, Texas
- Denver, Colo
- Riverside, Calif.
- Portland, Ore.
- Phoenix, Ariz.
Across the regions
All four major regions saw declines in contract signings in February, while year-over-year results varied.
February Pending Home Sales Index:
- Northeast: down 9.2% to 92.3—3.9% lower than last year
- Midwest: down 9.5% to 102.4—6.1% lower than last year
- South: down 13.0% to 133.2—2.9% higher than last year
- West: down 7.4% to 96.9—1.9% higher than last year