The housing market is showing signs of recovery as contract signings for existing homes saw a 1.6% growth in February, according to the National Association of Realtors. This increase marks the biggest month-over-month gain since last December, with an index reading of 75.6.
The rise in contract signings is a positive indicator for the housing market, which has been struggling due to high mortgage rates keeping both buyers and sellers on the sidelines. Despite pending sales being down by 7.0% annually, the increase in inventory is helping to boost the market.
NAR Chief Economist Lawrence Yun noted that while the sales growth may be modest, it shows slow and steady progress from the lows of late last year. He attributed the increase in demand to ongoing job gains and more inventory becoming available.
Yun also mentioned that there will likely be a rise in inventory due to recent growth in home building, as well as sellers who have delayed listing their homes in the past two years finally putting them on the market. This shift in the market is driven by changes in family composition, job situations, commuting patterns, and retirees wanting to be closer to their grandchildren.
Regionally, contract signings in the Northeast fell slightly by 0.3%, while the West saw a larger dip of 6.5% in February. On the other hand, the Midwest experienced a significant 10.6% gain in transactions, and the South rose by 1.1%.
Yun pointed out that high-cost regions in the Northeast and West are facing affordability challenges, with home prices rising faster than income growth. This poses difficulties for first-time buyers looking to enter the market.
Overall, the increase in contract signings for existing homes is a positive sign for the housing market, indicating a slow but steady recovery from the challenges faced in recent years.
