Recovery in Pending Home Sales as Spring Selling Season

Pending home sales in the U.S. showed a slight recovery last month, with a 2% rise in contract signings for existing homes. This increase brings the index to 72 in February, following a storm-ravaged January. The improvement exceeded economists’ expectations of a 1% rise, according to the National Association of Realtors (NAR).

Factors Behind the Recovery

Several factors contributed to the recovery, including calmer weather and a wider variety of available homes. These changes are offering hope for the upcoming spring selling season. However, contract signings remain significantly below typical historical levels, as noted by NAR’s Chief Economist, Lawrence Yun.

Regional Performance

Sales performance varied across regions. The South, the nation’s largest home-selling region, saw a 6.2% increase, recovering from a 9.2% decline in January. The Midwest experienced a more moderate rise, while the West and Northeast saw declines in pending sales.

Impact of Weather on the Market

Severe snowfall, particularly in the South, delayed home-buying activities. This pushed deals that would have closed earlier into February, leading to the observed uptick. Economists anticipate a slight improvement in home sales this year, driven by an increase in existing home supply and growing comfort with higher mortgage rates.

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Mortgage Rates and Future Outlook

Despite the uptick in sales, experts predict meaningful growth in home sales will not occur until mortgage rates drop to 5% or lower. JPMorgan Chase & Co.’s housing forecast for 2025 suggests that mortgage rates will remain above 6% at least through next year. The 30-year fixed mortgage rate was recorded at 6.71% as of March 21.

Price Pressures for First-Time Buyers

Home prices continue to pose challenges for first-time buyers. The national price index showed a 4.1% year-over-year increase in January, following a similar rise in December. These price pressures, combined with higher mortgage rates, are making homeownership more difficult for many.

Pending Sales as a Key Indicator

Pending home sales indicate future sales for previously owned homes, with properties typically going under contract 1-2 months before closing. As the market recovers, upcoming trends will likely influence the broader housing market. It’s unclear how these trends will shape the industry. The recovery phase suggests potential shifts in housing dynamics.