The warmest weather in several decades and the potential for higher interest rates later this year sent home shoppers flooding back into the nation's neighborhoods in February.
A monthly index of signed sales contracts to buy existing homes rose 5.5 percent for the month and is 2.6 percent higher compared with February 2016, according to the National Association of Realtors. This is the second-fastest pace in more than a decade.
The U.S. housing market has been suffering from a severe lack of homes for sale. Inventory at the start of this year was down compared with a year ago, and that has been accelerating home price gains for several months.
"Buyers came back in force last month as a modest, seasonal uptick in listings was enough to fuel an increase in contract signings throughout the country," said Lawrence Yun, the NAR's chief economist. "The stock market's continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year."
It may be difficult, however, to hold the February pace, as new supply is not keeping up with demand. Entry-level home buyers are hit hardest, as the choices in that range are slim and what is available is seeing multiple offers. Homes are selling faster today than they have in nearly two decades.
"The homes most buyers are in the market for are unfortunately the most difficult to find and ultimately buy," said Yun. "Affordability is not improving because home prices in some areas are still outpacing incomes by three times or more because of tight supply. How much new and existing inventory there is on the market this spring will determine if sales can reach their full potential and finally start reversing the nation's low homeownership rate."
Pending home sales rose 3.4 percent in the Northeast and jumped 11.4 percent in the Midwest for the month. Sales were 4.3 percent higher in the South and up 3.1 percent in the West. Sales in the West are just barely higher than they were a year ago, as prices there are rising fastest.