Housing News

More Homes Go Under Contract as Spring Housing Market Warms Up

The housing market began to thaw in February as more homes went under contract.

Pending home sales increased 1.8% in February from January, according to the National Association of Realtors (NAR). However, they ticked down 0.8% from February of last year.

Pending home sales is a forward-looking indicator based on signed real estate contracts. When they rise, home sales will likely go up in the coming months as those deals close. The opposite is also true should fewer homes go under contract.

The modest rise in sales in February was likely due to mortgage rates easing, briefly dipping below 6% in February, according to Freddie Mac data.

“The slight gain in pending contracts appears to be driven by improved affordability conditions,” said NAR Chief Economist Lawrence Yun in a statement. “However, those conditions could reverse if higher oil prices lead to an uptick in mortgage rates.”

Most of the decline in pending sales was in the Northeast, which was pummeled by winter storms. The region has also been constrained by high home prices and a lack of properties for sale.

About 3.6% fewer homes went under contract in the Northeast from January to February, according to NAR. The region also notched the largest annual decline with 12.1% fewer pending sales year-over-year.

The Midwest had the highest monthly rise in pending sales, increasing 4.6%. Annually, pending sales were essentially flat, ticking down 0.1% year-over-year.

In the South, about 2.7% more homes went under contract compared to the prior month. Pending sales also increased 1.2% year-over-year.

The West also experienced a bump, with pending sales up 0.9% month-over-month and rising 3.2% year-over-year.

Five of the 50 largest metropolitan areas saw double-digit spikes in annual pending home sales in February, according to NAR. (Metros include the main city, surrounding towns and suburbs, and smaller urban areas.)

San Diego experienced the biggest jump, with pending sales rising 13.5% year-over-year. It was followed by Jacksonville, Fla., at 12.1%; San Jose, Calif., at 10.6%; Denver, at 10.5%; and Miami, at 10%.

“For first-time homebuyers, purchasing a home is not a snap decision,” Yun said. “It takes time to build credit, save for a down payment, and fulfill existing rental lease agreements. Still, there is sizable pent-up demand that could be released into the market.”