"The housing sector's contraction is coming to an end"
Pending home sales increased in February, in a sign that the U.S. housing market is starting to recover from a slump in sales, according to the National Association of Realtors.
NAR's Pending Home Sales Index (PHSI), an indicator of home sales based on contract signings, grew 0.8% month over month to a reading of 83.2 in February. However, the index was still down by 21.1% compared to a year ago. According to the trade association, an index of 100 equals the level of contract activity in 2001.
Housing market recovery
NAR chief economist Lawrence Yun was optimistic about the increase in sales.
"After nearly a year, the housing sector's contraction is coming to an end," he said. "Existing-home sales, pending contracts and new-home construction pending contracts have turned the corner and climbed for the past three months."
Existing home sales increased for the first time in a year, jumping to a six-month high of 4.58 million in February. New single-family home sales during the month also bounced back 1.1% to 640,000 from a revised downward reading of 633,000, according to the Census Bureau's latest report.
Fannie Mae chief economist Doug Duncan commented: "While housing writ large has responded to the Fed's monetary tightening in a relatively predictable fashion, the rapid uptick in home sales in response to modest rate declines earlier this year corroborates our long-standing expectation that the housing sector will help moderate any future recession due to the significant pent-up demand."
Pending home sales regional breakdown
Pending home sales in the Northeast increased 6.5% from last month to 72.5, but down 17% from February 2022. The Midwest index improved 0.4% month over month to 84.9 in February, a decline of 16.5% from one year ago.
The South PHSI inched up 0.7% to 99.3 in February, down 21.7% from the previous year. Sales in the West decreased 2.4% in February to 64.6, shrinking 28.4% from February 2022.
"The affordable U.S. 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."
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