The affordability of mortgages proved to be too good to pass up in the month of February for prospective homebuyers, as a solid number of Americans signed contracts to purchase a residence, newly released numbers indicate.
Pending home sales, a monthly statistic that measures real estate purchases based on contract signings, rose more than 3.5 percent in February, according to the most recent data released by the National Association of Realtors. At a reading of 109.1 on NAR's Pending Home Sales Index, it was the largest jump in sales activity since July 2014, despite the fact that inventory levels remain insufficient.
Lawrence Yun, NAR chief economist, said that the low-interest rate environment continues to play a sizeable role in today's residential real estate marketplace.
"After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year and a modest, seasonal uptick in inventory," Yun explained.
He added that in order for conditions to continue improving, sold properties need to be replaced by new homes and existing homes going up for sale so that consumers have more options to work with.
"Without adequate supply, sales will likely plateau," Yun warned.
Builder confidence remains positive
Some of said supply will come in the form of newly built single-family units, which construction firms are more confident the market will be outfitted with in the coming months. Builder confidence in March held at 58 – on a scale of 1 to 100 – on the National Association of Home Builders' Housing Market Index. Any number above 50 suggests professionals consider conditions to be more favorable than unfavorable.
David Crowe, NAHB's chief economist, also pointed to how low-interest mortgages are having their intended effects on home buying intrigue.
"Solid job growth, low mortgage rates and improving mortgage availability will help keep the housing market on a gradual upward trajectory in the coming months," Crowe said.
Similar to builder confidence, mortgage credit access was unchanged in February at 123.8 on the Mortgage Bankers Association's Mortgage Credit Availability Index. The higher the MCAI goes, the easier it tends to be for borrowers to be approved.
Midwest pending home sales rise over 11 percent
As for the areas of the country where pending home sales were the most robust, the Midwest outperformed all the rest. In the U.S.' heartland, NAR's PHSI increased by double-digits to 112.6, up 11.4 percent from January and nearly 3 percent on a year-over-year basis, the pending-home sales report revealed. Following the Midwest's lead was the South, where sales increased 2 percent from the previous month and close to 0.5 percent from the same period in 2015. The Northeast and South recorded slight gains and losses, respectively, in month-over-month readings.
February was an encouraging month in several other real estate indicators, with new-home purchases and starts recording gains. Existing-home sales slipped, but asking prices declined as well.
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