Proof That Buyer Demand Is Strong
For the fourth consecutive month, pending home sales were on the rise, with contract signings climbing to the highest level since May 2006, according to the National Association of REALTORS®' Pending Home Sales Index. All four major regions of the U.S. posted increases last month, with the largest gains in the Northeast and the Midwest.
Here's a closer look at the Pending Home Sales Index across the country:
- Northeast: posted a strong rebounded after four consecutive months of decreases, with contract signings rising 10.1 percent in April month-over-month and now 9.4 percent above year ago levels.
- Midwest: pending home sales rose 5 percent in April and are 13.3 percent above April 2014 levels.
- South: contracts on home signings were up 2.3 percent month-over-month and are 14.8 percent above last April.
- West: contract signings inched up 0.1 percent in April and are 16.4 percent above a year ago.
The index, a forward-looking indicator based on contract signings, showed pending home sales up 3.4 percent in April month-over-month and up 14 percent above April 2014 levels, NAR’s index shows. This marks the largest annual increase since September 2012.
The steady gains in contract activity each month of this year is proof that buyer demand is strong, says Lawrence Yun, NAR's chief economist.
"REALTORS® are saying foot traffic remains elevated this spring despite limited – and in some cases severe – inventory shortages in many metro areas," Yun says. "Home owners looking to sell this spring appear to be in the driver’s seat, as there are more buyers competing for a limited number of homes available for sale. As a result, home prices are up and accelerating in many markets."
NAR recently reported that existing-home sales cooled in April, falling 3.3 percent month-over-month, but taking into account pending home sales, Yun expects a rebound in home sales heading into the summer. But gains will rely on a boost in inventory levels and evidence of moderating price growth, particularly since interest rates are now starting to rise.
"The housing market can handle interest rates well above 4 percent as long as inventory improves to slow price growth and underwriting standards ease to normal levels so that qualified buyers – especially first-time buyers – are able to obtain a mortgage," Yun says.