Another sure sign the housing market is in full recovery mode: Pending home sales rose 3.1% last month from January, according to the National Association of Realtors®. That’s a solid 12% higher than February 2014.
Strong sales in the Midwest contributed greatly to the gains by offsetting slight dips in the Northeast and South. The Pending Home Sales Index now sits at 106.9, the highest level since June 2013. Pending home sales are measured by contract signings. A contract is considered pending once all contingencies are met. At that point, sales are just waiting to close, making it a valid indicator of future home sale activity.
February’s rise from January gave a clear sign that cold weather had little impact on motivated buyers across the country. The Midwest was the standout, however: Pending home sales leaped 11.6% to an index of 110.4—a nearly 14% increase over February 2014.
“Several markets remain highly competitive due to supply pressures,” said Lawrence Yun, NAR’s chief economist. “The return of first-time buyers this year will depend on how quickly inventory shows up in the market.”
Inventory remains down across the board. Homeowners have been slow to trade up, or even downsize, leaving few options for buyers looking to make the move from renter to owner. Still, the NAR is forecasting a 6.4% increase in existing-home sales this year. Likewise, prices are expected to increase 5.6%.
February pending home sales dropped in both the South (1.4%) and the Northeast (2.3%), according to NAR. That’s not the full picture, however. The South is still nearly 11% above where it was in February 2014, and the Northeast is 4% above a year ago. The West, a consistently strong performer, showed a 6.6% increase in February and is up a whopping 18% from last year.
As more Americans find employment, consumer confidence has risen. In fact, consumer optimism, as measured by the University of Michigan, reached a 10-year peak of 95.5 in the first quarter of 2015—its highest level since the third quarter of 2004. And the better people feel about the economy, the more likely they are to buy houses.