Home buyers signed more contracts to purchase existing homes in March when compared with the previous month, according to data from the National Association of Realtors’ (NAR) pending home sales index.
The index, which was higher than analysts originally expected, showed a 3.8% increase. However, sales were 1.2% lower when compared to March 2018. This marked the 15th straight month of annual declines.
Lower Mortgage Rates
March saw mortgage rates fall sharply to their lowest level in more than a year. This likely helped incentivize some buyers to take action.
The average rate on the 30-year fixed mortgage (one of the most popular mortgage options available) topped 5% at the start of November 2018, but then started dropping before hitting around 4% in March.
“That gave buyers additional purchasing power, as well as more confidence in the overall market, where prices have been overheating,” writes CNBC’s Diana Olick in a recent article on the matter.
“We are seeing a positive sentiment from consumers about home buying, as mortgage applications have been steadily increasing and mortgage rates are extremely favorable,” wrote Lawrence Yun, chief economist for the NAR in a release.
Yun also noted that pending sales have fluctuated over the past several months; however, he predicted that figures will likely begin to rise “more consistently.”
Mortgage Application Activity
According to the data, mortgage applications to purchase a home have weakened recently, as mortgage rates are now about a quarter of a percentage point higher than they were in March.
Home price gains have slowed down considerably since last summer, but this was only in response to affordability falling to its worst level in more than a decade, writes Olick.
Pending home sales in the Northeast dropped 1.7% month-over-month and 0.4% year-over-year.
In the Midwest, the index gained 2.3% monthly; however, it was 5.0% lower than March of last year.
Pending home sales in the South went up 4.4% monthly and 0.7% annually.
The West saw pending home sales rise 8.7% monthly but were 1.6% below March 2018.
“Despite some affordability issues in the West, the numbers indicate that there is a reason for optimism,” added Yun. “Inventory has increased, too. These are great conditions for the region.”