The numbers: Contract signings on homes in the U.S. rose for the third month in a row, as home buyers adjust to high mortgage rates.
U.S. pending-home sales rose 0.8% in February, according to the monthly index released Wednesday by the National Association of Realtors (NAR).
Pending home sales rose by a smaller magnitude than the previous month’s increase of 8.1%.
The figures beat Wall Street’s expectations. Economists polled by the Wall Street Journal were expecting pending home sales to fall by 3%.
Contract signings rose in three regions on a monthly basis.
Pending home sales reflect transactions where the contract has been signed for an existing-home sale, but the sale has not yet closed.
Economists view it as an indicator for the direction of existing-home sales in subsequent months.
Key details: Compared to a year earlier, transactions were down by 21.1%.
On a monthly basis, pending sales rose in all but one region – the West. Pending home sales in the West fell by 2.4% in February.
The West has seen buyers pull back due to economic uncertainty as well as low inventory. Many big cities like San Francisco are seeing home prices drop.
On the other hand, sales were led by the Northeast, which registered a jump of 6.5%.
Big picture: Recent housing data indicates that the sector is out of the woods and buyers are willing to accept the new normal of mortgage rates above 6%.
But how sustained that recovery will be the big question. Supply remains a key challenge in many markets.
Plus, the recovery has been uneven. Big cities in the West, where homeowners saw a big run-up in home values, are seeing home values drop, while homeowners in the Southeast continue to see strong growth.
What the realtors said: “After nearly a year, the housing sector’s contraction is coming to an end,” NAR Chief Economist Lawrence Yun said.
“Existing-home sales, pending contracts and new-home construction pending contracts have turned the corner and climbed for the past three months,” he explained.
And the most affordable housing markets are leading the recovery, Yun said, such as in the Midwest and South.
What they’re saying: “Even though rates ticked up in February, many buyers took the plunge anyway, anxious that mortgage rates would be moving even higher this spring,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement.
And pending home sales could have risen even higher, she added, if there were more homes available on the market.
“It seems inconceivable that even as mortgage rates are double what they were a year ago, we are still talking about how low inventory is making buying a home a competitive sport,” Sturtevant added. “Supply has increased from last year, but the number of homes available for sale is still just half of what it was three years ago.”
Market reaction: Stocks
DJIA,
SPX,
were up in early trading on Wednesday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
was just short of 3.6%.
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