Dive Brief:
- Pending home sales inched up 1.4% in March to a rate of 110.5, up from the downwardly revised rate of 109.0 in February, the National Association of Realtors reported Wednesday.
- March's rate was 1.4% higher than March 2015. Pending sales last month reached the highest level since May 2015.
- Nearly all U.S. regions posted sales gains in March, with the exception of the West — where sales fell 1.8%. Pending sales grew in the Northeast by 3.2%, in the South by 3.0%, and in the Midwest by 0.2%.
Dive Insight:
March pending home sales beat expectations, as economists surveyed by MarketWatch predicted only a 0.7% gain.
NAR Chief Economist Lawrence Yun said in a release that the positive momentum in pending sales is good news during the spring buying season. "Despite supply deficiencies in plenty of areas, contract activity was fairly strong in a majority of markets in March," he said. Yun attributed the market's strength to low mortgage rates and a robust labor market.
However, Yun added that the lack of new home construction — especially entry-level homes for first-time buyers — is "starting to impact some top job producing markets, where endless supply shortages continue to limit choices for buyers and are driving up prices beyond what a growing share of households can comfortably afford."
Yun's analysis coincides with a recent Zillow report, which found a 10% decline in the number of available entry-level inventory in the past year. In response to calls to ramp up construction, some builders have countered that the "regulatory burden" is keeping them from increasing single-family building. The National Association of Home Builders testified to Congress last month that regulations can add up to 25% to the cost of building a home.
Housing reports this month have been mixed for the residential industry. Builder confidence remained unchanged at 58, housing starts dropped 8.8% in March, existing home sales rose 5.1%, and new home sales slipped 1.5%. The mediocre results for March reinforce reports that builders are still cautious about the market's momentum and the overall state of the economy.
