Pending home sales have reached their highest level in almost a full year and the West seems to be the only region experiencing a decline in home sales activity over the past month.
The Pending Home Sales Index (PHSI) is an indicator which looks forward based on contract signings. The PHSI hiked from 1.4% in March to 110.5% from 109.0% in February. It is now stable at 1.4% higher than in March of 2015, which reflected 109.0%. For the past 19 months consecutively, the index has increased and is at its highest, 111.0%, since May of 2015.
This spring season has introduced a solid beginning to the home buying season. Despite a shortage of inventory in many areas, contract activity remains strong and surprisingly low mortgage rates are contributing to the ease of affordability for buyers, removing the sting from higher home prices. Prices continue to rise quickly as wage growth lags behind.
Meanwhile, strong labor markets and borrowing fees will likely promote sustained buyer deamand and a reasonable sales pace. The failure to construct more single family homes in past years is starting to impact various top producing job markets. Plentious supply shortages are limiting choices for buyers who are experiencing an increase in home prices beyond what is affordable by most household standards.
The West in particular is experiencing decreased demand and the median home price has increased by 38% in the past three years. In the past four out of five months, pending home sales in the region have declined and are lower than one year ago from the third month in a row. March presented closed sales below last year's pace.
The Northeast experienced a PHSI increase by 3.2% to 97.0% in March and is currently resting at 18.4% above one year ago. The Midwest's index rose up 0.2% to 112.8% in March and is currently 4.0% above March of 2015.
The spring buying season clearly launched its beginning in March. As last year was a strong year of growth, it will be tough moving forward with year-over-year comparisons. The buying season is off to a strong start, thus ensuring the promise of the best year of total sales in the past ten years.
The South experienced a rise in pending home sales by 3.0% to an index of 125.4% in March, however this is still 0.6% lower than last March. The West's index decreased by 1.8% in March to 95.3% and is currently 7.9% below one year ago.
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