What The February Pending Home Sales Data Show:
Pending home sales climbed 1.6% in February to an index of 75.6, but remained 7.0% lower annually as climbing mortgage rates kept many would-be buyers on the sidelines. New home sales, which are also a measure of contract signings, fell just slightly on a monthly basis in February, but were still 5.9% higher than one year prior. Existing home inventory was still relatively scarce in February, but improved over the previous year, helping fuel a 9.5% monthly surge in existing home sales. Overall, active inventory grew 14.8% annually in February and prices remained relatively stable compared with the previous year as more affordable inventory made its way into the market. Though the market saw nearly 40% fewer homes for sale in February compared with pre-pandemic, home shoppers enjoyed more homes for sale and more affordable options than one year prior, which could boost buyer activity despite still-elevated mortgage rates.
Pending home sales surged 10.6% in the Midwest, but remained 2.5% lower annually in the region. The South saw a 1.1% monthly improvement, but contract signings were 8.5% lower year-over-year. The relatively high-priced Northeast and the West both saw falling pending home sales on both a monthly and an annual basis. Contract signings were down 0.3% monthly and 9.0% annually in the Northeast, and fell 6.5% monthly and 7.9% annually in the West.
What Does This Mean for Buyers, Sellers, & the Housing Market:
Pending home sales, or contract signings, measure the first formal step in the home sale transaction, namely, the point when a buyer and seller have agreed on the price and terms. Pending home sales tend to lead existing home sales by roughly one-to-two months and are a good indicator of market conditions. December’s surge in pending home sales preempted the February surge in existing home sales as buyers closed on contracts signed while mortgage rates tumbled towards the end of 2023. However, so far in 2024, mortgage rates have ranged from 6.6% to nearly 7%, drifting higher upon strong inflation and employment data.
Both new home sales and pending home sales leveled off compared to December’s surge as mortgage rates picked up steam. However, the number of homes listed for $200,000 to $350,000 increased by 20.6% annually in February 2024, offering options for buyers hoping to secure a home despite climbing mortgage rates. With the Best Time to Sell ahead, home shoppers can look forward to more for-sale inventory in the coming months.