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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.

First-Time Buyers Face Lack of Inventory and Higher Prices

Entry-level homes are rising in value the fastest in most large U.S. housing markets, making it tough for first-time buyers to enter the market this spring

- There are 5.9 percent fewer homes for sale in the U.S. than a year ago.

- There are 10.4 percent fewer entry-level homes for sale in the U.S. than a year ago.

- Low supply is driving up home prices among entry-level homes, which are often sought after by first-time buyers.

- National home values rose 4.8 percent to $186,200, according to the first quarter Real Estate Market Reports. Rents rose 2.6 percent to $1,389.

Home values are rising the fastest among entry-level homes in more than half of the largest U.S. housing markets, according to first quarter Zillow® Real Estate Market Reports.i Rising home values in this segment of the market can be attributed to a lack of supply, with 10 percent fewer homes for sale this year compared to last.

The median value of entry-level homes, those in the bottom thirdii of the market, rose the most over the past year in Denver, up 20 percent, followed by Portland and Dallas. There are 13 percent fewer entry-level homes available in Denver than there were a year ago. The number of entry-level homes available declined the most in Portland. There are 40 percent fewer entry-level homes available in Portland than there were a year ago.


The findings signal difficult times ahead for first-time homebuyers looking to enter the market. Going into home-shopping season this spring, buyers will find fewer homes in the bottom and middle of the market -- the homes most affordable for first-time buyers. The trend also highlights the different experiences buyers are having in the recovering housing market. Buyers looking for the most expensive homes will find slower price growth, a larger selection, and less competition this spring than entry-level buyers who are likely to face stiff competition, bidding wars, and very few homes to choose from.

"It's going to be a tough home-buying market this spring, especially for first-time buyers or even people looking to move up into a slightly more expensive home," said Zillow Chief Economist Dr. Svenja Gudell. "In order to stand out in a competitive market, buyers should get pre-approved for a loan, find an agent who has experience with bidding wars, and consider coming in at the asking price, so the seller knows they're serious."

In all of the largest U.S. housing markets, more than a third of the homes available for sale are in the most expensive segment -- in the top third of the overall housing stock in the market. In nine markets, top-tier homes make up more than half of the inventory.

The most expensive homes on the market are more likely to have a price cut, a signal that there's less demand for top-tier homes. The share of top-tier listings with a price cut has increased 1.6 percentage points over the past year.

Metropolitan  Area	First Quarter  2016 Zillow  Home Value  Index (ZHVI)	Bottom- Tier  Percent  Home  Value  Increase	Bottom- Tier  Percent  Inventory  Change	Middle- Tier  Percent  Home  Value  Increase	Middle- Tier  Percent  Inventory  Change	Top-Tier  Percent  Home  Value  Increase	Top-Tier  Percent  Inventory  Change
United States	$        186,200	n/a	-10.4%	n/a	-10.4%	n/a	-1.9%
New York, NY	$        384,100	-0.8%	-9.0%	1.8%	-3.6%	3.5%	4.7%
Los Angeles-Long Beach-Anaheim, CA	$        565,400	6.2%	-26.3%	6.2%	-11.3%	8.1%	1.3%
Chicago, IL	$        193,800	0.7%	-14.2%	3.1%	-10.5%	1.0%	2.0%
Dallas-Fort Worth, TX	$        182,100	14.7%	-27.5%	13.0%	-32.5%	11.2%	-10.1%
Philadelphia, PA	$        204,400	0.9%	-2.0%	1.9%	-6.4%	1.3%	0.5%
Houston, TX	$        172,100	7.7%	n/a	6.4%	n/a	2.8%	n/a
Washington, DC	$        364,100	2.8%	-10.8%	2.0%	-0.7%	1.0%	2.7%
Miami-Fort Lauderdale, FL	$        230,600	11.7%	-3.6%	10.5%	7.8%	6.3%	15.4%
Atlanta, GA	$        163,000	7.3%	-11.5%	6.3%	-11.9%	5.5%	1.3%
Boston, MA	$        387,400	3.2%	-13.1%	4.9%	-4.8%	4.5%	14.6%
San Francisco, CA	$        806,600	11.0%	-17.7%	11.5%	-6.7%	12.1%	1.7%
Detroit, MI	$        123,100	-3.2%	2.0%	6.4%	-20.6%	2.8%	-3.6%
Riverside, CA	$        304,200	10.0%	-3.8%	6.9%	-11.8%	2.7%	1.7%
Phoenix, AZ	$        219,200	11.2%	-28.5%	8.4%	-11.6%	4.2%	-5.3%
Seattle, WA	$        382,700	12.6%	-32.4%	11.7%	-24.4%	10.7%	-16.8%
Minneapolis-St Paul, MN	$        219,400	5.2%	-7.9%	4.5%	-12.8%	2.1%	4.2%
San Diego, CA	$        506,100	6.0%	-25.5%	5.7%	2.3%	5.2%	3.9%
St. Louis, MO	$        141,900	2.3%	-3.0%	5.5%	-10.9%	5.4%	-6.6%
Tampa, FL	$        163,600	10.3%	-28.1%	8.9%	-20.4%	6.2%	-12.4%
Baltimore, MD	$        244,800	1.3%	-3.9%	1.5%	-3.9%	0.6%	-3.2%
Denver, CO	$        333,500	20.3%	-12.7%	15.7%	5.4%	10.6%	-12.7%
Pittsburgh, PA	$        126,700	2.9%	8.6%	1.8%	1.7%	3.0%	9.3%
Portland, OR	$        322,000	16.2%	-39.5%	14.8%	-38.7%	13.5%	-19.7%
Charlotte, NC	$        159,800	4.3%	-34.7%	5.1%	-34.5%	4.4%	-16.6%
Sacramento, CA	$        339,700	13.0%	-22.3%	8.7%	-21.2%	7.1%	-8.6%
San Antonio, TX	$        150,200	8.2%	n/a	6.7%	n/a	4.5%	n/a
Orlando, FL	$        184,100	7.9%	-23.1%	7.9%	-16.0%	4.7%	-4.8%
Cincinnati, OH	$        143,400	4.0%	-18.2%	3.9%	-20.0%	2.9%	-9.1%
Cleveland, OH	$        125,500	-1.3%	-7.9%	2.5%	-11.0%	2.2%	0.8%
Las Vegas, NV	$        203,200	9.1%	-11.1%	9.2%	-8.3%	5.8%	6.8%
Columbus, OH	$        154,600	4.8%	-24.1%	5.7%	-13.7%	4.2%	-3.0%
Indianapolis, IN	$        130,200	2.9%	-8.7%	2.7%	-22.4%	3.7%	-11.8%
San Jose, CA	$        956,500	10.5%	-14.2%	12.6%	1.5%	12.1%	7.5%
Austin, TX	$        247,500	10.1%	n/a	8.7%	n/a	6.8%	n/a
Virginia Beach, VA	$        210,900	0.2%	1.1%	1.1%	2.4%	1.1%	0.0%