Pending Home Sales Decline More Than Economists Expected

February home sales fell flat of economist expectations, pointing toward a less than robust spring homebuying season. Pending home sales dropped 10.6% last month, marking the fifth consecutive month pending home sales declined. Compared to 2020, pending sales dropped 0.5%, making February the first month to see an annual decline in eight months. Pending home sales are an important factor as they indicate the number of existing home sales for the following month. MarketWatch economists predicted just a 3.1% dip. It's the result of the record low housing inventory and increasing mortgage rates, says MarketWatch.

What happened: Pending home sales fell in every region of the country. The South notched the largest decline, with a 13% monthly decrease, while the West had the smallest drop at 7.4%.

The index is pegged to the level of pending sales recorded in 2001. In the West and the Northeast, the pace of contract signings dropped below that level.

The big picture: To some extent, the downturn in pending home sales is a reflection of February’s severe winter weather. Especially in places like Texas, Americans were hunkering down rather than going out to sign off on real-estate deals. But even as spring creeps in, the impact of the cold weather will be felt. Pending home sales are a leading indicator for existing-home sales, suggesting that the data for home sales will be lower for another month or two.

At the same time, the low inventory of homes for sale remains a serious constraint for prospective buyers. Economists anticipate more sellers will come online in the months to come, but until then the dearth of listings will inevitably constrain how many deals can close for the foreseeable future.

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