Contracts to purchase previously owned homes unexpectedly fell in February for an eighth straight month, a sign of further weakness in the industry.
The index of pending home sales decreased 0.8% after a 0.2% drop the prior month that was previously reported as a gain, figures from the National Association of Realtors showed today in Washington. The median forecast of 39 economists surveyed by Bloomberg called for a 0.2% rise.
Colder-than-normal weather probably played a role in discouraging prospective buyers faced with rising mortgage rates, higher prices and limited supply of cheaper properties. At the same time, the Realtors group said buyer traffic is stabilizing, which may help spur demand as temperatures warm.
“For housing, it’s been primarily an issue of bad weather,” Russell Price, senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Not a lot of buyers were enticed to go out and look, and not a lot of sellers put their best foot forward” in terms of staging the property or hosting an open house. “Conditions will improve as the weather improves,” he said.
Estimates in the Bloomberg survey ranged from a drop of 3% to a gain of 4% after a previously reported increase of 0.1%. The index fell to 93.9, the lowest since October 2011.
Two of four regions—the South and Northeast—saw a decrease from the previous month, today’s report showed.
Contract signings decreased 10.2% from a year earlier on an unadjusted basis, the most since April 2011, after a 9.3% drop in the prior 12-month period.
Economists consider pending home sales a leading indicator because they track contract signings. Existing home sales are tabulated when a contract closes, typically a month or two later.
“Buyer traffic information from our monthly Realtor survey shows a modest turnaround, and some weather-delayed transactions should close in the spring,” Lawrence Yun, NAR’s chief economist, said in a statement.
The weather also was a restraining factor in other parts of the housing market, recent reports showed.
Purchases of new homes fell in February to the lowest level in five months, according to Commerce Department data. Sales of previously owned properties declined last month to the lowest level since July 2012, the National Association of Realtors reported. The National Association of Home Builders/Wells Fargo index of builder confidence rose less than forecast in March.
Companies such as Lennar Corp., the biggest homebuilder by market value, are optimistic about demand once the weather improves.
“In the first quarter, we have seen clear signs that volume is returning to the market even as severe weather made conditions difficult,” Stuart Miller, Lennar’s chief executive officer, said on a conference call on March 20. “The fundamental drivers of improvement in the housing market remain a steadily improving economy with a slowly improving employment picture unlocking pent-up demand.”
At the same time, an increase in borrowing costs and higher property values has curtailed some homebuyers.
The 30-year fixed mortgage rate averaged 4.32% in the week ended March 20, up from 3.54% around the same time a year ago, according to Freddie Mac. The S&P/Case-Shiller index of home prices in 20 cities climbed 13.2% from January 2013. Still, it was the smallest gain since August, indicating cooling prices may bring relief to buyers.