Colder than average temperatures and heavy snow in much of the U.S. failed to keep February home buyers away. Signed contracts to buy existing homes rose 3.1 percent from January, according to the National Association of Realtors (NAR).
The Realtors' so-called "Pending Home Sales Index" is 12 percent higher than one year ago, and is at its highest level since June, 2013.
The gains were primarily driven by sales in the West and Midwest. Pending sales jumped 11.6 percent month-to-month in the Midwest and are now 13.8 percent higher than a year ago. Sales in the Northeast fell 2.3 percent but are 4.1 percent above a year ago. Sales in the South decreased 1.4 percent sequentially, but are 10.8 percent above last February. Sales in the West climbed 6.6 percent and are now 18.3 percent above a year ago.
"Pending sales showed solid gains last month, driven by a steadily-improving labor market, mortgage rates hovering around 4 percent and the likelihood of more renters looking to hedge against increasing rents," said Lawrence Yun, chief economist for the NAR. "These factors bode well for the prospect of an uptick in sales in coming months. However, the underlying obstacle—especially for first-time buyers—continues to be the depressed level of homes available for sale."
Higher prices and tight supply continue to hamstring the market. Total housing inventory at the end of the month was slightly lower than February of 2014, and new listings are not coming on a nearly the pace needed to meet demand. Closed February sales of existing homes, which represent contracts signed in December and January, improved only slightly, up 1.2 percent month-to-month. Home builders have also not ramped up production, citing still tight credit for construction loans and rising prices for land in the best locations.
"Many are now facing lot shortages," said Stephen Paul of Maryland-based Mid-Atlantic Builders. "Public [builders] are buying more land direct and squeezing out the traditional land developer margins. That is causing more builders to have to develop their own lots, for which they may not have the resources or expertise."
The Realtors predict total existing-homes sales in 2015 to be around 5.25 million, an increase of 6.4 percent from 2014. They also predict the national median existing-home price for all of this year to increase around 5.6 percent. In 2014, existing-home sales declined 2.9 percent and prices rose 5.7 percent.