Pending Home Sales Maintain Momentum in March

Pending home sales increased slightly in March for the second consecutive month and reached their highest level in almost a year, according to the National Association of Realtors®. Only the West region saw a decline in contract activity last month.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, climbed 1.4 percent to 110.5 in March from an downwardly revised 109.0 in February and is now 1.4 percent above March 2015 (109.0). After last month's slight gain, the index has increased year-over-year for 19 consecutive months and is at its highest reading since May 2015 (111.0).

In the short-term, the healthy labor market and favorable borrowing costs should lead to sustained buyer demand and a durable pace of sales. However, Yun says the consequences from a failure to construct more single-family homes in recent years are starting to impact some top job producing markets, where endless supply shortages continue to limit choices for buyers and are driving up prices beyond what a growing share of households can comfortably afford.Lawrence Yun, NAR chief economist, says last month's pending sales increase signals a solid beginning to the spring buying season. "Despite supply deficiencies in plenty of areas, contract activity was fairly strong in a majority of markets in March," he said. "This spring's surprisingly low mortgage rates are easing some of the affordability pressures potential buyers are experiencing and are taking away some of the sting from home prices that are still rising too fast and above wage growth."  

"Demand is starting to weaken in some areas, particularly in the West, where the median home price has risen an astonishing 38 percent in the past three years," adds Yun. "As a result, pending sales in the region have now declined in four of the last five months and are lower than one year ago for the third month in a row. Closed sales in the region in March were also below last year's pace."

The PHSI in the Northeast increased 3.2 percent to 97.0 in March, and is now 18.4 percent above a year ago. In the Midwest the index inched up 0.2 percent to 112.8 in March, and is now 4.0 percent above March 2015.

Pending home sales in the South rose 3.0 percent to an index of 125.4 in March but are still 0.6 percent lower than last March. The index in the West declined 1.8 percent in March to 95.3, and is now 7.9 percent below a year ago.

Home Price Increases Slow Down in February According to the S&P/Case-Shiller Home Price Indices

S&P Dow Jones Indices today released the latest results for the S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices. Data released today for February 2016 shows that home prices continued their rise across the country over the last 12 months. More than 27 years of history for these data series is available, and can be accessed in full by going to www.homeprice.spdji.com. Additional content on the housing market can also be found on S&P Dow Jones Indices' housing blog: www.housingviews.com.

Year-over-Year The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 5.3% annual gain in February, unchanged from the previous month. The 10-City Composite increased 4.6% in the year to February, compared to 5.0% previously. The 20-City Composite's year-over-year gain was 5.4%, down from 5.7% the prior month.

Portland, Seattle, and Denver reported the highest year-over-year gains among the 20 cities with another month of annual price increases. Portland led the way with an 11.9% year-over-year price increase, followed by Seattle with 11.0%, and Denver with a 9.7% increase. Seven cities reported greater price increases in the year ending February 2016 versus the year ending January 2016. 

Month-over-MonthBefore seasonal adjustment, the National Index posted a gain of 0.2% month-over-month in February. The 10-City Composite recorded a 0.1% month-over-month increase while the 20-City Composite posted a 0.2% increase in February. After seasonal adjustment, the National Index recorded a 0.4% month-over-month increase. The 10-City Composite posted a 0.6% increase and the 20-City Composite reported a 0.7% month-over-month increase after seasonal adjustment. Fourteen of 20 cities reported increases in February before seasonal adjustment; after seasonal adjustment, only 10 cities increased for the month.

Analysis"Home prices continue to rise twice as fast as inflation, but the pace is easing off in the most recent numbers," says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. "The year-over-year figures for the 10-City and 20-City Composites both slowed and 13 of the 20 cities saw slower year-over-year numbers compared to last month. The slower growth rate is evident in the monthly seasonally adjusted numbers: six cities experienced smaller monthly gains in February compared to January, when no city saw growth. Among the six were Seattle, Portland OR, and San Diego, all of which were very strong last time.

"Mortgage defaults are an important measure of the health of the housing market. Memories of the financial crisis are dominated by rising defaults as much as by falling home prices (see first chart). Today as well, the mortgage default rate continues to mirror the path of home prices. Currently, the default rate on first mortgages is about three-quarters of one percent, a touch lower than in 2004. Moreover, the figure has drifted down in the last two years. While financing is not an issue for home buyers, rising prices are a concern in many parts of the country. The visible supply of homes on the market is low at 4.8 months in the last report. Homeowners looking to sell their house and trade up to a larger house or a more desirable location are concerned with finding that new house. Additionally, the pace of new single family home construction and sales has not completely recovered from the recession."

Source:  S&P/Case-Shiller National Home Price Index; S&P/Experian Consumer Credit First Mortgage Default Index

The chart below depicts the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices. The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 5.3% annual gain in February 2016. The 10-City and 20-City Composites reported year-over-year increases of 4.6% and 5.4%.

This chart shows the index levels for the U.S. National, 10-City and 20-City Composite Indices. As of February 2016, average home prices for the MSAs within the 10-City and 20-City Composites are back to their winter 2007 levels. Measured from their June/July 2006 peaks, the peak-to-current decline for both Composites is approximately 11-13%. Since the March 2012 lows, the 10-City and 20-City Composites have recovered 34.5% and 36.3%.

Table 1 below summarizes the results for February 2016. The S&P/Case-Shiller Home Price Indices are revised for the prior 24 months, based on the receipt of additional source data.

	February 2016	February/January	January '16/December '15	1-Year
Metropolitan Area	Level	Change (%)	Change (%)	Change (%)
Atlanta	126.16	0.4%	0.1%	6.1%
Boston	181.92	-0.1%	-0.4%	3.7%
Charlotte	135.77	0.4%	-0.1%	4.2%
Chicago	128.77	-0.3%	-0.4%	1.8%
Cleveland	108.13	-0.6%	0.1%	3.6%
Dallas	157.46	0.5%	0.1%	9.0%
Denver	176.35	0.9%	0.2%	9.7%
Detroit	103.35	0.1%	-0.1%	6.5%
Las Vegas	146.08	0.2%	0.2%	6.4%
Los Angeles	243.06	0.7%	0.5%	6.8%
Miami	206.92	0.1%	0.4%	6.2%
Minneapolis	145.48	-0.4%	-0.5%	4.0%
New York	178.53	-0.5%	-0.2%	2.1%
Phoenix	157.22	0.3%	-0.2%	6.0%
Portland	192.38	0.7%	0.4%	11.9%
San Diego	219.06	0.1%	0.5%	6.4%
San Francisco	218.87	1.1%	-0.6%	9.3%
Seattle	188.94	1.1%	0.2%	11.0%
Tampa	177.93	0.6%	0.2%	7.8%
Washington	208.65	-0.2%	-0.3%	1.4%
Composite-10	197.00	0.1%	-0.1%	4.6%
Composite-20	182.79	0.2%	0.0%	5.4%
U.S. National	175.61	0.2%	-0.1%	5.3%
Source: S&P Dow Jones Indices and CoreLogic
Data through February 2016

Table 2 below shows a summary of the monthly changes using the seasonally adjusted (SA) and non-seasonally adjusted (NSA) data. Since its launch in early 2006, the S&P/Case-Shiller Home Price Indices have published, and the markets have followed and reported on, the non-seasonally adjusted data set used in the headline indices. For analytical purposes, S&P Dow Jones Indices publishes a seasonally adjusted data set covered in the headline indices, as well as for the 17 of 20 markets with tiered price indices and the five condo markets that are tracked.

	February/January Change (%)		January '16/December '15 Change (%)
Metropolitan Area	NSA	SA	NSA	SA
Atlanta	0.4%	1.2%	0.1%	0.8%
Boston	-0.1%	0.6%	-0.4%	0.2%
Charlotte	0.4%	0.6%	-0.1%	0.3%
Chicago	-0.3%	0.9%	-0.4%	1.0%
Cleveland	-0.6%	0.8%	0.1%	0.7%
Dallas	0.5%	0.8%	0.1%	0.8%
Denver	0.9%	1.5%	0.2%	0.9%
Detroit	0.1%	1.2%	-0.1%	1.2%
Las Vegas	0.2%	1.0%	0.2%	0.5%
Los Angeles	0.7%	1.1%	0.5%	1.1%
Miami	0.1%	0.6%	0.4%	0.5%
Minneapolis	-0.4%	0.7%	-0.5%	0.7%
New York	-0.5%	0.0%	-0.2%	0.3%
Phoenix	0.3%	0.5%	-0.2%	0.4%
Portland	0.7%	1.0%	0.4%	1.5%
San Diego	0.1%	0.2%	0.5%	1.2%
San Francisco	1.1%	1.5%	-0.6%	0.6%
Seattle	1.1%	1.3%	0.2%	1.5%
Tampa	0.6%	1.0%	0.2%	0.9%
Washington	-0.2%	0.1%	-0.3%	0.7%
Composite-10	0.1%	0.6%	-0.1%	0.7%
Composite-20	0.2%	0.7%	0.0%	0.8%
U.S. National	0.2%	0.4%	-0.1%	0.5%
Source: S&P Dow Jones Indices and CoreLogic
Data through February 2016