Pending home sales rise for third straight month

Transactions down 21% year-over-year, signal normalization: NAR

(Illustration by The Real Deal with Getty)

Holden Walter-Warner

Mar 29, 2023, 4:30 PM

Is the temperamental housing market starting to stabilize? Maybe, according to one metric released this week.

Pending home sales climbed in February for the third consecutive month, according to a report from the National Association of Realtors. The trade group’s Pending Home Sales Index — a forward-looking measure based on contract signings — ticked up 0.8 percent in February. The index hit 83.2 for the month; 100 is where contract activity was in 2001.

After the slight rise and a sharp gain in February, pending transactions are still down 21.1 percent year-over-year, when the average 30-year fixed mortgage rate was almost half its level last month.

The three-month gain followed several months of consecutive declines in contract activity as rising mortgage rates roiled buyers. Those have shown some signs of stabilizing in recent months since an autumn peak above 7 percent. Now pending home sales seem to be doing the same.

“Mortgage rates have improved in recent weeks after the federal government guaranteed the status of most mortgages amidst uncertainty in the financial market,” NAR chief economist Lawrence Yun said in a statement, noting residential mortgages are becoming more readily available.

The February increases did not hit U.S. markets equally. All four regions tracked by NAR recorded a year-over-year drop in pending home purchases. Only three of four regions saw a month-to-month gain, led by a 6.5 percent surge in the Northeast. This is where the West was lost, as it recorded a 2.4 percent month-to-month decrease in pending home sales.

It’s another bellwether of normalcy for a topsy-turvy housing market. In addition to the three-month climb in pending deals, existing home sales and pending contracts for new construction homes have been on the rise.

The housing market is usually sleepy in the winter, so it will be interesting to track if pending home sales and existing home sales continue to rise alongside temperatures.