Contracts to buy previously owned U.S. homes fell in February, held back by a shortage of properties, but there is little to suggest that the housing market’s recovery is stalling.
The National Association of Realtors on Wednesday said its Pending Home Sales Index, based on contracts signed last month, slipped 0.4 per cent to 104.8. Still, contracts last month remained at the second highest level in nearly three years.
Economists polled by Reuters had expected signed contracts, which become sales after a month or two, to dip 0.2 per cent.
The realtors group blamed the pullback on a shortage of homes for sale.
“Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50 per cent from current levels,” said NAR chief economist Lawrence Yun in a statement.
Housing starts have been steadily increasing, but remain 60-per-cent below their peak in 2006. Groundbreaking for single-family homes intended for sale continues to lag sales.
The supply squeeze is helping to push up home prices, putting a solid foundation under the housing recovery.
Data on Tuesday showed home prices in 20 metropolitan areas tracked by S&P/Case Shiller soared 8.1 per cent in January from a year ago, the biggest rise since June 2006.
The housing market recovery also is being supported by record-low mortgage rates, which have been held down by the Federal Reserve’s very accommodative monetary policy stance.
Demand for loans to buy a home rose last week after two straight weeks of declines, a separate report showed.
The Mortgage Bankers Association said its gauge of loan requests for home purchases, a leading indicator of home sales, increased 6.7 per cent.
The rise in loan applications, which came as mortgage rates fell for the first time in three weeks, unwound the prior two weeks’ declines.
Although with roughly a third of home resales last month being cash purchases, mortgage applications are no longer a good predictor of home sales.
Investors are big players in the housing market, accounting for just over a fifth of existing home sales in February.
Pending home sales were up 8.4 per cent compared with February last year. Home resale contracts were down in the Northeast and South. They increased in the Midwest and West.