Dive Brief:

• The rate of pending home sales, which indicates the number of U.S. homes currently under contract, rose 5.5% to 112.3 in February from 106.4 in January, according to the National Association of Realtors’ Pending Home Sales Index released Wednesday.

• Each region tracked in the index posted gains, with the Midwest seeing the biggest hike at 11.4% to 110.8 in February, though down 0.6% from a year ago. The South saw an increase of 4.3% to 127.8 and was 4.2% ahead of February 2016. The Northeast rose 3.4% to 102.1 in February, putting it 6.6% ahead of the year-ago mark. The West climbed 3.1% during the month to 97.5, up 0.2% from a year ago. 

• The index’s February reading is 2.6% above the same period a year ago and is the highest mark since April 2016.

Dive Insight:

The positive pending-home sales reading comes on the heels of a lift in the stock market and steady employment opportunities across the industry, NAR Chief Economist Lawrence Yun said in a release. He noted that buyers were likely swayed by mild weather ahead of the spring selling season along with the expectation of higher mortgage interest rates ahead.

Still, Yun noted, the trend of home prices growing faster than incomes could drive sales down. 

The report follows a decrease in existing-home sales from January to February, which were up 5.4% year-over-year and reported price growth of 7.7% annually. Meanwhile, new-home sales reached a seven-month high during the period, rising 6.1% from January and 12.8% from February 2016.

Despite confidence in the market, persisting lot and labor shortages will likely continue to hamper recovery. While housing starts bounced back 3% in February from January, building permit authorizations — an indicator of future construction activity — declined during the month, which could trigger a slowdown in activity in the coming months.

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