According to the National Association of Realtors®, home sales in March rose 3.4 percent to break a nine-month streak of stagnant activity. Although still 7.9 percent below the March 2013 figures, it continued to grow in April. The Midwest and Northeast gained momentum sufficient to outweigh declining activity in the West and South. The U.S. pending home sales increase in March is an indicator of slow, but positive growth in the real estate market.
Economists predict that existing-home sales will continue to increase throughout 2014 to about 4.9 million in 2014, slightly below the 5.1 million recorded in 2013, but expect continued growth to about 5.3 million next year. Continued inventory shortages will drive existing-home prices up an expected six to seven percent in 2014.
The Pending Home Sales Index is based on sales of existing homes for which the contracts have been signed, but the sales have not closed. It is based on a national sample representing about 20 percent of the total number of transactions nationwide. It has proven to be a reasonably accurate indicator of the level of closed existing-home sales over the next two months.
NAR economist Lawrence Yun predicts a gradual increase in home sales as inventory levels give buyers more choices and mortgage interest rates have experienced a slight decline. He further states that this is not a trend, projecting an increase in mortgage interest rates to 5.5 percent in 2015. According to Yun, '€œAnnual home sales, however, due to a sluggish first quarter, will likely be lower than last year.'€? The impact of the current increase on housing sales will largely depend upon whether income grows within the labor market. Possible changes to mortgage underwriting conditions could further impact sales.
Housing inventory increased in April by 16.8 percent. This means that 2.29 million existing homes are available for sale which translates to a 5.9-month supply. Existing home sales account for more than 90 percent of total home sales. The U.S. pending home sales increase in March continuing into April is good news for home sellers as the market gradually turns to their benefit.
The National Association of Realtors® is the largest trade association in the country with over a million members. The newsletter provides current market statistics for the benefit of realtors and their clients.