Pending Home Sales Index Surges in February, Easily Beating Forecast

The Pending Home Sales Index (PHSI) jumped 5.5% to 112.3 in February, up from 106.4 in January and far above the Econoday consensus 2.4% forecast. Last month’s index reading is 2.6% above a year ago, is the highest since last April (113.6) and the second highest since May 2006 (112.5).

“Buyers came back in force last month as a modest, seasonal uptick in listings were enough to fuel an increase in contract signings throughout the country,” Lawrence Yun, NAR chief economist said. “The stock market’s continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year.”

The Pending Home Sales Index, or PHSI for short, is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed but has not yet closed.

“The homes most buyers are in the market for are unfortunately the most difficult to find and ultimately buy,” Mr. Yun added. “The country’s healthy labor market is translating to greater job security, but affordability is not improving because home prices in some areas are still outpacing incomes by three times or more because of tight supply.”

Mr. Yun said new and existing inventory on the market this spring will determine if sales can reach their full potential and finally start reversing the nation’s low homeownership rate. Under the Obama Administration, despite renewed efforts to loosen lending standards, homeownership in the U.S. has been at the lowest level since the 1950s.

The PHSI in the Northeast rose 3.4% to 102.1 in February and is now 6.6% higher than one year ago. In the Midwest, pending home sales surged 11.4% to 110.8 but remains 0.6% lower than in February 2016.

Pending home sales in the South increased 4.3% to 127.8 and are now 4.2% above last year’s reading. The index in the West gained 3.1% to 97.5 and is now 0.2% higher than a year ago.

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