The economy is still sending off mixed signals, but one thing is clear – housing is definitely improving. Pending home sales (contracts signed) rose 5.1 percent in April, marking the third consecutive month improvement, reaching their highest level in over ten years, according to the National Association of Realtors.
The pending home sales index (PHSI) is up 4.6 percent above April 2015 and have now increased year-over-year for 20 consecutive months.
Vast gains in the South and West
Although the Midwest saw a “meager decline,” all other region saw healthy gains in contract activity last month. Dr. Lawrence Yun, NAR chief economist, says vast gains in the South and West propelled pending sales in April to their highest level since February 2006.
“The ability to sign a contract on a home is slightly exceeding expectations this spring even with the affordability stresses and inventory squeezes affecting buyers in a number of markets,” Dr. Yun notes.
“The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market,” he added.
How long will interest rates remain low?
Mortgage interest rates remain historically low, but Dr. Yun observes that “it remains to be seen how long they will stay this low.” It is clear that the Federal Reserve will raise rates this year, but how many times is unpredictable.
Further, Dr. Yun said that “inflation could potentially surprise the market and cause rates to increase suddenly,” adding that “Even if rates rise soon, sales have legs for further expansion this summer if housing supply increases enough to give buyers an adequate number of affordable choices during their search.”
Sales are projected to do even better
NAR expects sales to beat earlier estimates this year, following the market’s best first quarter of existing home sales since 2007. After accelerating to 6.8 percent a year ago, national median existing-home price growth is forecast to slightly moderate to between 4 and 5 percent.
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