The Pending Home Sales Index (PHSI) ticked up for the second straight month (0.4%), rising 0.4% to 107.6 in March from 107.2. However, even with last month’s increase in activity, the index fell on an annualized basis (3.0%) for the third straight month.
“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,” Lawrence Yun, NAR chief economist 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.”
Mr. Yun also anticipates that affordability will be a 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 mortgage rates at a 4-year high are further straining the budgets of aspiring buyers.
“What continues to hold back sales is the fact that prospective buyers are increasingly having difficulty finding an affordable home to buy,” he said.
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 PHSI rose 2.4% to 101.3 in March, but is still 6.0% below the level in March 2017.
“As anticipated, the multiple winter storms and unseasonably cold weather contributed to the decrease in contract signings in the Northeast,” Mr. Yun added.
In the South, pending home sales fell 2.5% to an index of 128.6 in March and are 0.3% higher than March 2017. The PHSI in the West fell 1.1% in March to 94.7 and is 2.2% below a year ago.
Mr. Yun forecasts for existing-home sales in 2018 to be around 5.61 million — up from 5.51 million in 2017. The national median existing-home price is expected to increase by roughly 4.4%. In 2017, existing sales gained 1.1% and prices rose 5.8%.
“Much of the country is enjoying a thriving job market, but buying a home is becoming more expensive,” Mr. Yun noted. “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.”