Pending home sales see slight rise
With inventory constraints hampering activity, the Pending Home Sales Index (PHSI) rose slightly by of 0.4%, according to the National Association of Realtors (NAR).
The PHSI, a forward-looking indicator based on contract signings, was at 107.6 for March from a downwardly revised 107.2 in February. While the Index has been on the rise for two months in a row, on an annualized basis the Index fell 3%.
NAR Chief Economist Lawrence Yun says sales activity is moving sideways and not breaking higher despite strong job growth.
"Healthy economic conditions are creating considerable demand for purchasing a home, but not all buyers are able to sign contracts because of the lack of choices in inventory," Yun said. "Steady price growth and the swift pace listings are coming off the market are proof that more supply is needed to fully satisfy demand.
Yun noted that affordability continues to stop prospective buyers who are having difficulty finding a home a purchase. Prolonged cold weather helped decrease contract signings in the Northeast.
The PHSI in the Northeast fell 5.6% to 90.6 in March and is now 8.1% below a year ago. In the Midwest the index rose 2.4% to 101.3 in March but is 6% lower than March 2017. Pending home sales in the South climbed 2.5% to an index of 128.6 in March and are 0.3% higher than last March. The index in the West declined 1.1% in March to 94.7 and is 2.2% below a year ago.
Yun says that affordability will be a significant topic of discussion and driving factor of if overall activity can break out above year ago levels. Price appreciation in most markets continues to outpace incomes, and the recent uptick in mortgage rates to over a four-year high only adds to the budget constraints aspiring buyers are feeling this spring.
"Much of the country is enjoying a thriving job market, but buying a home is becoming more expensive," said Yun. "That is why it is an absolute necessity for there to be a large increase in new and existing homes available for sale in coming months to moderate home price growth. Otherwise, sales will remain stuck in this holding pattern and a growing share of would-be buyers — especially first-time buyers — will be left on the sidelines."