February brought a small boost in pending home sales, signaling that buyers are cautiously returning to the market. According to the latest report from the National Association of REALTORS® (NAR), contract signings for home sales edged up as mortgage rates dipped and home prices moderated—but hurdles remain as spring approaches.
A Modest Monthly Gain
NAR’s Pending Home Sales Index, which tracks future closings based on signed contracts, rose 1.8% from January. Compared to last year, sales are slightly down 0.8%, showing that while the market is improving, it hasn’t fully rebounded.
Lawrence Yun, NAR’s chief economist, notes, “The slight monthly gain in pending contracts appears to be driven by improved affordability conditions. However, those conditions could reverse if higher oil prices lead to an uptick in mortgage rates.”
Mortgage rate volatility is indeed on the rise. Rates briefly dipped below 6%—the lowest in over three years—before bouncing back to an average of 6.11% last week, according to Freddie Mac. Global tensions, including conflict in the Middle East, have also pushed gas prices higher and renewed inflation concerns, keeping buyers cautious.
Affordability Is Improving
Even with rates creeping upward, affordability has improved compared to a year ago. Today’s mortgage rates translate to roughly $113 less per month for the average mortgage payment. NAR’s Housing Affordability Index shows wages outpacing home price growth by nearly 4 percentage points, helping buyers stretch their dollars further.
Inventory gains and moderate price increases have also eased pressure. The median existing-home price in February was $398,000, up just 0.3% from last year. Fewer homes sold above asking price—14% in February versus 21% a year ago—suggests sellers are adjusting prices to attract buyers.
First-time buyers are gradually returning, representing 34% of existing-home sales in February. Yun adds, “Purchasing a home is not a snap decision for first-time buyers. It takes time to build credit, save for a down payment, and fulfill rental leases. Still, pent-up demand is waiting to enter the market, supported by 6 million more jobs than pre-COVID levels.”
Regional Trends Vary
The strength of pending sales varied by region:
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Midwest: Up nearly 5% month-over-month, leading all regions.
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South: Increased 2.7% from January.
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West: Slight 0.9% rise.
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Northeast: The only region to decline, with a 3.6% monthly drop and 12% year-over-year decline, hindered by higher prices and limited inventory. Median existing-home prices in the Northeast hit $479,800, up 3.3% annually.
What This Means for Buyers
While affordability improvements are encouraging, buyers should remain mindful of rate fluctuations and regional differences. The market is showing signs of life, but conditions could shift quickly depending on global events and economic trends. For those ready to buy, the current window may offer more manageable prices and mortgage payments—but timing and preparation remain key.