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The numbers: The index of pending home sales increased 2.4% in February following the previous month’s rebound, the National Association of Realtors reported Monday.
The index measures real-estate transactions where a contract was signed but the sale had not yet closed, benchmarked to contract-signing activity in 2001. It serves as an indicator for existing-home sales reports in the coming months.
What happened: Compared with February 2019, signings were up 9.4% nationally.
On a monthly basis, pending sales were up in every region with the West seeing the largest gain at 4.6%, followed by the Midwest (4.5%) and the Northeast (2.8%). In the South, contract signings inched up just 0.1%.
The big picture: Before the coronavirus outbreak hit the U.S., the residential real-estate market was in a decent position. While the short supply of homes for sale had put a ceiling on the number of sales that could happen in any given month, there was an excess amount of demand in the market. In particular, the low interest rate environment that had prevailed since last summer was keeping sales volumes elevated, as it helped make buying a home more affordable.
The question now for the market is how much the COVID-19 pandemic will hurt the country’s economy and real-estate market. Studies based on previous widespread illness outbreaks have shown that the real-estate industry has historically rebounded fairly well in areas that were hard hit. Much will depend on how quickly those who lost their jobs or income as a result of the coronavirus pandemic can recover.
What they’re saying: “Housing, just like most other industries, suffered from the coronavirus crisis, but once this predicament is behind us and the habit of social distancing is respected, I’m encouraged there will be continued home transactions though, with more virtual tours, electronic signatures, and external home appraisals. Many of the home sales that are likely to be missed during the first part of 2020 may simply be pushed into late summer and autumn parts of the year,” said Lawrence Yun, chief economist for the National Association of Realtors.
Market reaction: The Dow Jones Industrial Average DJIA, +1.79% and the S&P 500 SPX, +2.10% were both up in Monday morning trading as investors were upbeat on efforts to contain the coronavirus. The yield on the 10-year Treasury note TMUBMUSD10Y, -5.55% was down slightly.
