Gains in the National Housing Market
Home sales have reached their highest point since about a year ago. According to the National Association of Realtors (NAR), the Pending Home Sales Index reached 112.3 in February, an increase of 5.5 percent from January. The index hasn’t been this high since last April, when it reached 113.6. What’s more, this is the second highest index reading since 112.5 in May 2006.
More Houses on the Market…
The gain in pending home sales can be attributed partly to a modest increase in supply. According to Lawrence Yun, NAR chief economist, this small rise in the number of available listings coupled with an increase in demand due to warmer weather le to the upswing in contract signings. “The stock market’s continued rise and steady hiring in most markets is spurring significant interest in buying,” he adds, “as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year.”
…But More Supply Is Still Needed
The market, however, is experiencing a shortage of lower and mid-priced homes. Unfortunately, as a result, multiple offer situations are becoming more common. This, according to Yun, could lead to “ebbs and flows” in sales activity as buyers quickly snap up homes that become available on the market. Overall, existing-home sales are expected to reach 5.57 million in 2017. This is 2.3 percent higher than the 5.45 million sales in 2016. Sales saw an increase of 3.8 percent for all of 2016.
Home Prices Continue to Increase
Job security may be improving, but housing affordability isn’t keeping pace. In some areas of the country, home prices are still three times as much as income, partly because of the lack of supply. Home prices should increase around 4 percent in 2017; in comparison, prices climbed an additional 5.1 percent in 2016. To improve housing affordability and increase the country’s low rate of homeownership, there will need to be a significant increase in the supply of both new and existing homes.
Regional Contract Activity
Northeast – The Pending Home Sales Index reached 102.1; an increase of 3.5 percent from January and 6.6 percent from February 2016.
Midwest – The Pending Home Sales Index reached 110.8; an increase of 11.4 percent from January and a decrease of 0.6 percent from February 2016.
South – The Pending Home Sales Index reached 127.8; an increase of 4.3 percent from January and 4.2 percent from February 2016.
West – The Pending Home Sales Index reached 97.5; an increase of 3.1 percent from January and 0.2 percent from February 2016.