While pending home sales increased from last month, numbers remain near record lows
Pending home sales across the US increased 2% in February, according to data released Thursday by the National Association of Realtors (NAR), although they’re still significantly below historical levels.
According to the NAR, pending sales – contracts to buy previously owned US homes – increased last month in the Midwest and South, with the largest gains taking place in the South. Pending home sales declined in the Northeast and West, with the largest decline in the West.
Sam Williamson, senior economist with First American, believes these numbers may indicate a slow start to the spring buying season.
“While pending home sales exceeded expectations in February, they are hovering near historical lows,” Williamson said. “Purchase mortgage applications – another leading indicator of housing activity – rebounded slightly in March, but also remain well below historical levels.”
The Pending Home Sales Index (PHSI), an indicator used by the NAR to project home sales based on contract signings, increased nationwide to 72.0 in February. While it was an increase over January, it was down 3.6% from February 2024.
In the South, the PHSI increased by 6.2% to 86, but fell 3.4% from the same time last year. In the Midwest, the index jumped by 0.7% to 73.3, but dropped by 4.7% year over year.
“The South, in particular, has benefited from new residential construction, which has boosted supply and improved affordability in these areas,” Williamson said. “Additionally, more listings are showing price reductions, and homes are lingering longer on the market, signaling potential respite for buyers even as mortgage rates hold steady.”
The index decreased by 3.0% in the West to 55.9, a 3.5% decrease from February 2024. In the Northeast, the PHSI fell 0.9% to 62.8, or a 2.5% decline over the same month last year.
The NAR is forecasting mortgage rates to average 6.4% in 2025 and 6.1% in 2026. The organization anticipates that existing-home sales will increase by 6% in 2025 and by 11% in 2026. New-home sales are expected to increase as well, with a 10% rise in 2025 and a 5% increase in 2026.
However, Williamson noted that affordability challenges may continue to limit the growth of new home sales.
“Heading into spring, a modest seasonal increase in home-buying activity is expected,” he said. “Nevertheless, challenges like affordability constraints and the ongoing rate lock-in effect continue to weigh heavily compared to the dynamics of pre-pandemic spring markets.”
While sales are forecasted to increase, so are median home prices. The NAR expects median home prices to increase by 3% in 2025 and 4% in 2026.
The benchmark for the PHSI was set at 100 in 2001, marking the first year the index was established. The volume of existing-home sales in 2001 was between 5.0 and 5.5 million, which the NAR considers normal for the current US population.
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