Is housing slump over as new homebuyer deals grow 3rd straight month?
Are mortgage rates helping encourage more homebuyers to make offers on existing (as opposed to newly built) homes? Maybe. Today we got NAR data showing that 0.8% more homes went under contract in February than January. Not a big gain for pending home sales, but it’s the 3rd straight month of gains. NAR chief economist Lawrence Yun was optimistic:
“After nearly a year, the housing sector’s contraction is coming to an end. Existing-home sales, pending contracts and new-home construction pending contracts have turned the corner and climbed for the past three months.”
Here are a few other key items to note:
– The annual figure was still dismal: February 2023 new pending deals were down 21.1% compared to February 2022.
– But this makes sense because rates were between 3.75% and 4.125% in February 2022, per Mortgage News Daily (MND).
– February 2023 rates began at 6% and ended at 6.75% (see chart above).
– So I can see Yun’s optimism if new sales contracts grew in this rising rate context.
– Plus these monthly trends might matter more than annual figures when the cycle turns.
– And 8.1% more homes went under contract in January than December.
– So to grow another 0.8% in February after that gain is encouraging.
– As for March rates, they began at 7.125% and they’re now around 6.625% (chart below).
– This means rates are even for March vs. February. The March pending home sales come out April 27.
– Other good news: affordability is improving as home prices drop.
– See links below for affordability on existing and new homes.
Please reach out or comment with questions.
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Reference:
– Pending Home Sales Grew 3rd Straight Month, +0.8% in Feb (NAR)
– Income needed to qualify for $363k existing home prices (TBP)
– Income needed to qualify for $438,200 new home prices (TBP)
– Pending Home Sales Add To Resilient Housing Narrative (MND)
– We partner with MND and MBS Live on rate data. Check them out!