Pending home sales hit 10-year high in April

Pending home sales rose in April to their highest level since February 2006, boosted by gains in the South and the West.

The sales index, a forward-looking indicator based on contract signings, surged 5.1 percent to 116.3 last month from 110.7 in March, the National Association of Realtors (NAR) said on Thursday. 

{mosads}The index has posted gains for three straight months and has now increased year-over-year for 20 consecutive months.

All major regions saw gains in contract activity last month except for the Midwest, which had a slight decline.

“The ability to sign a contract on a home is slightly exceeding expectations this spring, even with the affordability stresses and inventory squeezes affecting buyers in a number of markets,” said Lawrence Yun, NAR chief economist.

“The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market,” Yun said.

Mortgage rates, which have remained below 4 percent for 16 of the past 17 months, are likely to continue hovering around 4 percent in coming months, Yun said.

Yun says it remains to be seen how long rates will stay this low.

Inflation caused by rising gas prices and higher rents has the potential to push up rates down the road.

“Even if rates rise soon, sales have legs for further expansion this summer if housing supply increases enough to give buyers an adequate number of affordable choices during their search,” Yun said. 

Pending home sales in the South jumped 6.8 percent to an index of 133.9, and they soared 11.4 percent in the West.

Sales in the Northeast climbed 1.2 percent to 98.2 in April.

In the Midwest the index declined slightly, by 0.6 percent, to 112.9 in April, but it is still 2 percent above April 2015.

Overall, the housing market had the best first quarter for existing sales since 2007, which saw 5.66 million sales, including a 1.7 percent increase in April.

Based on those early positive results in what was a slow-growth quarter, sales are expected to exceed earlier estimates and come in around 5.41 million, or 3 percent higher than last year, Yun estimates. 

Prices on previously owned homes are expected to fall between 4 and 5 percent, a slower pace than the 6.8 percent last year.