March takes the Pending Home Sales Index up a notch
After two months of declines, the Pending Home Sales Index (PHSI) ticked up 1.9% to 111.3 in March—breaking the streak of falling month-over-month numbers—while year-over-year contract signings jumped 23.3%. Experts attribute the large increase from last year to the pandemic-induced lockdown that greatly affected March 2020 numbers. For context, an index of 100 is equal to 2001’s contract activity.
“The increase in pending sales transactions for the month of March is indicative of high housing demand,” says the National Association of Realtors® chief economist, Lawrence Yun. “With mortgage rates still very close to record lows and a solid job recovery underway, demand will likely remain high.”
This high demand continues to be met with low inventory, but Yun is hopeful for an increase in supply in the near future. “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,” says Yun. “Although these moves won’t immediately replenish low supply, they will be a step forward.”
The economy effect—what a growing economy means for the housing market
Both existing-home sales and median home prices are projected to increase in 2021. Experts predict sales to climb 10%, reaching 6.2 million, and the median home price to grow 9%, hitting $323,900.
Meanwhile, housing starts are expected to reach 1.6 million in 2021 and 1.7 million in 2022, which would help to combat the continuing shortage of housing inventory. And while the economy is projected to expand 4.5% in 2021 and 3.5% in 2022, experts anticipate inflation will take mortgage rates up a notch to 3.2% in 2021 and 3.5% in 2022.
Double-digit growth across the regions
All four major regions saw double-digit growth in pending home sales from last year, while three out of the four regions also saw month-over-month gains in March.
- Northeast: up 6.1% to 97.9—16.7% higher than last year
- Midwest: down 3.7% to 98.6—14.1% higher than last year
- South: up 2.9% to 137.2—27.9% higher than last year
- West: up 2.9% to 94.5—29.8% higher than last year