US pending home sales rise for third month in a row - NAR
US pending home sales unexpectedly rose in February, growing for the third month in a row, according to data released on Wednesday by the National Association of Realtors.
Pending home sales ticked up 0.8% on the month, taking the index to 83.2. This was ahead of expectations for a 2.3% decline. On the year, pending home sales fell 21.1%.
NAR chief economist Lawrence Yun said: "After nearly a year, the housing sector’s contraction is coming to an end. Existing-home sales, pending contracts and new-home construction pending contracts have turned the corner and climbed for the past three months."
The index for the Northeast rose 6.5% on the month to 72.5, but was down 17% from February 2022. The Midwest index edged up 0.4% to 84.9 on the month, but was 16.5% lower than a year ago.
The index for the South was up 0.7% on the month in February to 99.3, but down 21.7% on the year. Finally, the West index fell 2.4% on the month to 64.6, and was down 28.4% on the year.
"The affordable US regions - the Midwest and South - are leading the recovery," Yun said. "Mortgage rates have improved in recent weeks after the federal government guaranteed the status of most mortgages amidst uncertainty in the financial market. While access to commercial mortgage loans could become increasingly difficult, residential mortgage loans are expected to be more readily available."
Kieran Clancy, senior US economist at Pantheon Macroeconomics, said: "The increase in the February index is wildly at odds with the slump in mortgage applications, though the two measures often diverge in the short-term, not least because the pending sales include all-cash buyers.
"That said, divergences between mortgage applications and pending home sales rarely persist; even all-cash buyers take note when mortgage demand plunges, and credit conditions are set to tighten significantly in the wake of the recent spate of bank failures. We now have most of the weekly data for March, which point to flatlining mortgage applications after the February plunge.
"The bigger picture here is that home sales will remain low and rangebound until affordability improves dramatically. Mortgage payments for new homebuyers are hovering at around half of disposable incomes, compared to 30-to-35% in the pre-Covid period. Interest rates are likely to remain elevated for some time - even if they do not rise much further - so an improvement in affordability will need to come via a decline in prices. That process is underway, but it has much further to run; we look for an additional drop of around 15% over the next year."