Pending home sales inch up in February. Realtors are worried about U.S. home prices rising faster than incomes.

By Aarthi Swaminathan

'Slow and steady progress,' National Association of Realtors says about sales activity ticking up

The numbers: Pending home sales ticked up in February as the U.S. spring home-buying season is underway.

Pending-home sales rose 1.6% in February from the previous month, according to the monthly index released Thursday by the National Association of Realtors (NAR).

Pending-home sales reflect transactions where the contract has been signed for an existing-home sale, but the sale has not yet closed. Economists view it as an indicator for the direction of existing-home sales in subsequent months.

The sales pace exceeded expectations on Wall Street. Economists were expecting pending home sales to increase by 1% in February.

Transactions were down 7% from last year.

Big picture: The housing market is flashing mixed signals of recovery and stagnation.

While inventory ticks up and signals that the lock-in effect might be easing and sales may be rebounding, mortgage rates stay near 7%, keeping a lid on home-buying demand.

Affordability continues to be strained: A typical home buyer who wants to buy a median-priced home of $413,000 at the current level of mortgage rates would need to make at least $114,000 to comfortably afford the monthly mortgage payments, according to analysis by real-estate brokerage Redfin. That's 35% more than what the median household income is.

What the Realtors said: "While modest sales growth might not stir excitement, it shows slow and steady progress from the lows of late last year," Lawrence Yun, chief economist at the NAR, said in a statement.

"Ongoing job gains are clearly increasing demand along with more inventory," he added.

But at the same time, "home prices rising faster than income growth is not healthy and adds challenges for first-time buyers," Yun said.

-Aarthi Swaminathan

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03-28-24 1004ET

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