Pending home sales rose in March after a sharp decline in February, according to the National Association of Realtors.
Pending sales, which measure contract signings for homes and usually lead closed sales by 45 to 60 days, rose 1.9 percent compared with the prior month, the NAR said Thursday. That was lower than the 3.8 percent gain forecast by analysts polled by Econoday. Other estimates had called for even stronger sales.
Despite the disappointing rebound, pending sales are up by jaw-dropping numbers from a year ago—in part because the annual comparisons now include weeks in which the economy was in a state of shock and severe lockdowns as the pandemic struck. Compared with March 2020, when many homes were pulled from the market and even more could not be shown to prospective buyers, signings are up 23.3 percent.
Home prices have continued to rise at a record price, pricing out some would-be buyers, and the number of homes for sale is at or near record lows in much of the country. Mortgage rates climbed in February and March, making homes even less affordable.
"The increase in pending sales transactions for the month of March is indicative of high housing demand," said 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." #NARPHS
— NAR Research (@NAR_Research) April 29, 2021
Some homeowners remain reluctant to allow home shoppers into their homes for fear of catching the virus. Those worries should ease in the months ahead, which could lead to more houses on the market. What’s more, new homes are being built at a rapid pace, which should also ease the supply shortage.
“Low inventory has been a consistent problem, but 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,” Yun said. “Although these moves won’t immediately replenish low supply, they will be a step forward.”
Still, elevated demand could keep prices rising in the months ahead. A big test for the market will be whether the reopenings in major cities—New York City mayor Bill de Blasio announced Thursday that the city would fully reopen July 4—can lure back home buyers and stop the outflux to surrounding suburbs and smaller towns and cities.