The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, climbed 1.4 percent to 110.5 in March from a downwardly revised 109.0 in February. The index is 1.4 percent above a year ago and means that more homes are in the process of being sold.
After last month’s slight gain, the index has increased year-over-year for 19 consecutive months and is at its highest reading since May 2015. Only the West region saw a decline in contract activity last month.
“Despite supply deficiencies in plenty of areas, contract activity was fairly strong in a majority of markets in March,” National Association of Realtors (NAR) Chief Economist Lawrence Yun said in a press release. “This spring’s surprisingly low mortgage rates are easing some of the affordability pressures potential buyers are experiencing and are taking away some of the sting from home prices that are still rising too fast and above wage growth.”
In the short-term, the healthy labor market and favorable borrowing costs should lead to sustained buyer demand and a durable pace of sales. However, Yun says the consequences from a failure to construct more single-family homes in recent years are starting to impact some top job producing markets, where endless supply shortages continue to limit choices for buyers and are driving up prices beyond what a growing share of households can comfortably afford.
The PHSI in the Northeast increased 3.2 percent to 97.0 in March, and is 18.4 percent above a year ago. In the Midwest the index inched up 0.2 percent to 112.8 in March, and is 4.0 percent above March 2015.
Pending home sales in the South rose 3.0 percent to 125.4 in March but are 0.6 percent lower than a year ago. The index in the West declined 1.8 percent in March to 95.3, and 7.9 percent below a year ago.