US pending home sales unexpectedly rise to highest since August

US pending home sales unexpectedly rose in February for a third month, adding to signs that the housing market may be stabilising after a tumultuous year.

The National Association of Realtors’ index of contract signings to purchase previously owned homes increased 0.8 per cent last month to 83.2 – the highest since August – according to data released on Wednesday (Mar 29). The median estimate in a Bloomberg survey of economists called for a 3 per cent decline.

The increase in sales indicates the housing market may be getting back on its feet after last year’s rapid run-up in borrowing costs. Mortgage rates eased last week to a six-week low, helping drive demand to purchase a home.

They may decline further if the unfolding banking crisis continues to drive down Treasury yields, and the Federal Reserve has signalled it’s nearly done hiking interest rates.

“After nearly a year, the housing sector’s contraction is coming to an end,” Lawrence Yun, NAR’s chief economist, said in a statement.

Signings rose in February in all regions but the West, while the increase was led by a 6.5 per cent advance in the Northeast. However, on an unadjusted basis, contract signings were down 21.1 per cent from a year ago. 

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There are some other signs the residential real estate sector is feeling a reprieve. Separate data last week showed sales of previously owned homes surged by the most since mid-2020 in February, ending a year-long decline. It also pointed to the first decline in pre-owned home prices in more than a decade.

The pending home sales report is often seen as a leading indicator of existing home sales, given homes typically go under contract a month or two before they’re sold. BLOOMBERG