Pending home sales jumped 9.8% in the South (including Florida) in March - leading all regions - as lower mortgage rates fueled strong spring homebuying activity.

WASHINGTON — Pending home sales increased 6.1% in March – the greatest month-to-month increase since December 2023 (+7.0%) – according to the National Association of Realtors®. The Northeast experienced month-over-month losses in transactions, while the Midwest, South and West saw gains, which were most substantial in the South. Year-over-year, contract signings grew in the Midwest but fell in the Northeast, South and West – with the Northeast undergoing the greatest decrease.

The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – rose 6.1% to 76.5 in March. Year-over-year, pending transactions lessened by 0.6%. An index of 100 is equal to the level of contract activity in 2001.

"Home buyers are acutely sensitive to even minor fluctuations in mortgage rates," said NAR Chief Economist Lawrence Yun. "While contract signings are not a guarantee of eventual closings, the solid rise in pending home sales implies a sizable build-up of potential home buyers, fueled by ongoing job growth."

Mortgage rates fell by around 20 to 30 basis points in March from the first two months of this year. The average mortgage rate was 6.65% in March, down from a 6.96% average in January and down from a 6.84% average in February.

Pending home sales regional breakdown

The Northeast PHSI dropped 0.5% from last month to 62.5, down 3.0% from March 2024. The Midwest index expanded 4.9% to 77.7 in March, up 1.4% from the previous year.

The South PHSI increased 9.8% to 94.1 in March, down 0.4% from a year ago. The West index climbed 4.8% from the prior month to 58.6, down 2.0% from March 2024.

"Consumers should note that the spring homebuying season typically brings in a surge of home buyers and sellers compared to the winter months," added Yun. "In March, signed contracts surged 34.1% from February based on non-seasonally adjusted raw data, reflecting a pattern consistent with previous years. In addition, inventory levels rose by 8.1% in March from the prior month, indicating a more dynamic housing-market environment."

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.

The index is based on a sample that covers about 40% of multiple listing service data each month. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

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