The National Association of Realtors' Pending Home Sales Index measures the number of contracts to buy homes that are signed each month. Because contract signings precede closings by several weeks, the index can be a good predictor of future home sales numbers.
In February, the NAR found pending home sales down 10.6 percent from the month before but virtually unchanged from where they were one year earlier. Lawrence Yun, NAR's chief economist, says the month-over-month decline is mostly due to the fact that there are too few homes for sale. “The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market are swift but contracts are not clicking due to record-low inventory,” Yun said. “Potential buyers may have to enlarge their geographic search areas, given the current tight market.”
Fortunately, Yun says recent mortgage-rate increases don't appear to have affected prospective home buyers. And, with the spring market just beginning, homes for sale should start to pick up, which will help bring balance to the market and slow price increases.
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