The National Association of Realtors (NAR) said the Pending Home Sales Index (PHSI) bounced back in January, rising 4.6% and beating the forecast.
Forecasts ranged from a low of -3.0% to a high of 2.0%. The consensus was 1.0%.
The PHSI, a forward-looking indicator based on contract signings, increased to 103.2 in January, up from 98.7 in December. Year-over-year contract signings were still down 2.3%, making this the thirteenth straight month of annual decreases.
“A change in Federal Reserve policy and the reopening of the government were very beneficial to the market,” NAR Chief Economist Lawrence Yun said.
“Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers.”
Mr. Yun argued higher rates “discouraged many would-be buyers” throughout 2018, but now improvement in pending home sales is likely to continue.
The Federal Reserve eased rate hikes, which hasn’t yet been baked into existing home sales and other housing data.
“Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers,” he added. “Income is rising faster than home prices in many areas and mortgage rates look to remain steady.”
“Furthermore, job creation will help lift home buying.”
Of the four major regions, three saw a decline for the year-over-year, while the Northeast saw growth.
The PHSI in the Northeast gained 1.6% to 94.0 in January, and now stands 7.6% higher than a year ago. In the Midwest, the index rose 2.8% to 100.2 in January, but is still 0.3% lower than January 2018.
Pending home sales in the South soared 8.9% to 119.8, which is 3.1% lower than this time last year. The index in the West gained 0.3% in January to 87.3, though it fell 10.1% below a year ago.