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NAR: Pending Home Sales Grow 1.9% in March

The number of homes under contract but not yet closed rose a bit this month following two months of decline. However, the number of contract signings was up 23.3% compared to March 2020 – the first month the nation saw an impact from the new COVID-19 pandemic.

WASHINGTON – U.S. pending home sales increased in March after two consecutive months of declines, according to the National Association of Realtors® (NAR).

All but one of the four major U.S. regions in the study saw month-over-month gains in March, though each area recorded year-over-year growth.

The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – rose 1.9% to 111.3 in March. Year-over-year, contract signings jumped 23.3%, with the difference due in large part to the pandemic-induced lockdown in March 2020. An index of 100 is equal to the level of contract activity in 2001.

“The increase in pending sales transactions for the month of March is indicative of high housing demand,” says Lawrence Yun, NAR’s chief economist. “With mortgage rates still very close to record lows and a solid job recovery underway, demand will likely remain high.”

Citing low inventory as a continuing problem, Yun says “more inventory will show up as new home construction intensifies in the coming months, as well as from a steady wind-down of the mortgage forbearance program. Although these moves won’t immediately replenish low supply, they will be a step forward.”

Yun predicts that existing-home sales will rise by 10% in 2021 to reach 6.2 million in 2021, while the median home price is anticipated to increase by 9% in 2021 to $323,900.

Housing starts are forecasted to reach 1.6 million in 2021 and 1.7 million in 2022, providing relief to the housing inventory deficit. Mortgage rates are expected to modestly climb higher over the next two years, to 3.2% in 2021 and 3.5% in 2022. Inflation is also expected to rise thanks to a stronger economy and higher fiscal spending. The economy is anticipated to expand 4.5% in 2021 and 3.5% in 2022.

March Pending Home Sales regional breakdown: The Northeast PHSI rose 6.1% to 97.9 in March, a 16.7% increase from a year ago. In the Midwest, the index fell 3.7% to 98.6 last month, up 14.1% from March 2020.

Pending home sales transactions in the South jumped 2.9% to an index of 137.2 in March, up 27.9% from March 2020. The index in the West grew 2.9% in March to 94.5, up 29.8% from a year prior.

© 2021 Florida Realtors®