Pending home sales index hit a three-year high in February

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An index of contract signings for the purchase of previously owned U.S. homes unexpectedly increased in February to a three-year high, representing solid housing activity that's likely to retrench because of the pandemic.

An index of pending home sales advanced 2.4% to 111.5 after a revised 5.3% January jump that was the largest one-month increase since 2010, according to National Association of Realtors data Monday. The median forecast in a Bloomberg survey of economists called for a 1.8% decline.

Contract signings rose 11.5% from a year earlier on an unadjusted basis, the strongest annual gain since April 2015.

Despite the strength, efforts to slow the outbreak of Covid-19 are reverberating through the economy, including residential real estate. A projected sales slowdown will mark a departure from prior months, when low interest rates, a robust labor market and elevated consumer confidence spurred housing — tailwinds that are now headwinds.

"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," Lawrence Yun, NAR's chief economist, said in a statement. Yun noted that the data do not capture the fallout from measures taken to control the outbreak.

January contract signings were revised from a previously reported 5.2% gain.

Pending sales last month increased in all four regions, led by a 4.6% gain in the West and a 4.5% advance in the Midwest. The index for the South, the largest region, was the highest since March 2006.

Forecasts for February ranged from a 5% decrease to a 3.5% increase.

Bloomberg News