Ever wondered what those “pending” signs really mean when you see them popping up in your neighborhood? It’s more than just a house about to be sold, pending home sales are a crucial economic indicator that can tell us a lot about the direction of the housing market.
In simple terms, a pending home sale is when a buyer and seller have agreed on the price and signed a contract, but the final sale hasn't gone through yet. It’s basically a glimpse into the near future of real estate, and lately, that future has shown some interesting shifts.
Now, if you're anything like me, numbers and indexes can sometimes feel like a foreign language. But don’t worry, I’ll break it down in a way that makes sense. I've spent years watching these trends, both as someone who loves following the market and, well, as someone who has moved a few times too many.
According to the National Association of REALTORS® (NAR), pending home sales actually increased by 2.0% in February 2025, according to the latest report! This little jump offers a glimmer of hope after some ups and downs. But, before we get too excited, let's unpack what this all means for you, me, and the housing market as we look ahead to 2025 and 2026.
Pending Home Sales: Trends and Forecast 2025-2026
Think of pending home sales as the housing market's early bird indicator. It's like getting a sneak peek at what's cooking before it’s served. Basically, it tracks the number of homes that have gone under contract – meaning buyers and sellers have agreed on a deal, but the sale hasn't officially closed yet. This is super important because it gives us a heads-up on future existing-home sales. If pending sales are up, it usually means closed sales will follow suit in a month or two. It’s like a compass pointing us in the direction the housing market is likely to travel.
February 2025: A Closer Look at the Numbers
So, what did February 2025 tell us? Nationally, pending home sales showed a positive bump of 2.0%. That's a welcome sign, especially after a period where things felt a bit sluggish. However, when you dig into the regional details, the picture gets a bit more nuanced:
- Northeast: Things cooled down a bit in the Northeast, with a 0.9% decrease in pending sales for February.
- Midwest: The Midwest saw a slight increase of 0.7%. Steady as she goes in this region.
- South: The South really stood out, jumping up by a solid 6.2%! Seems like the housing market in the South is showing some real energy.
- West: Unfortunately, the West took a step back with a 3.0% decrease.
While the national number is positive, it's clear the housing market isn't moving in lockstep across the country. And if we compare this February to last year, pending transactions are still down by 3.6% nationwide. We're still not quite back to where we were, but that monthly increase is definitely a step in the right direction.
Why This Mixed Bag? My Take on the Current Market
From my experience, what we’re seeing right now is a market still trying to find its footing. We’ve had interest rate hikes, affordability challenges, and just a general sense of uncertainty floating around. That can make people hesitant to jump into big decisions like buying a home.
Lawrence Yun, the Chief Economist at the National Association of REALTORS® (NAR), hit the nail on the head when he said that “contract signings remain well below normal historical levels.” He also pointed out that lower mortgage rates would be a game-changer. And he’s absolutely right. Mortgage rates have a huge impact on both buyers and sellers. High rates make buying less affordable, which cools demand. And for current homeowners, higher rates can create a “lock-in effect” – meaning they're less likely to sell and give up their lower existing mortgage rate, which reduces the number of homes available for sale.
Looking Ahead: NAR's Forecast for 2025 and 2026
Okay, so where do we go from here? Luckily, NAR has shared their economic forecast, giving us a peek into what they expect for the next couple of years. Here’s a summary of what they’re predicting:
- Mortgage Rates: NAR forecasts mortgage rates to average 6.4% in 2025 and then slightly decrease to 6.1% in 2026. While not back to the super-low rates we saw a few years ago, this suggests some stabilization is expected.
- Existing-Home Sales: They predict a 6% increase in existing-home sales in 2025, and a more substantial 11% jump in 2026. This is encouraging! It suggests they believe the market will pick up steam.
- New-Home Sales: New home sales are also expected to rise, with a 10% increase in 2025 and another 5% in 2026. New homes often have more inventory right now, which could be driving this growth.
- Median Home Price: They’re forecasting moderate home price increases – 3% in 2025 and 4% in 2026. This is good news for both buyers and sellers. It signals that prices aren't expected to crash, but also that income growth might finally start to catch up, improving affordability a bit.
Here’s a quick table summarizing NAR's forecast:
| Metric | 2025 Forecast | 2026 Forecast |
|---|---|---|
| Mortgage Rates (Avg) | 6.4% | 6.1% |
| Existing-Home Sales | +6% | +11% |
| New-Home Sales | +10% | +5% |
| Median Home Price | +3% | +4% |
My Two Cents on the Forecast: Cautious Optimism
I think NAR’s forecast paints a realistic picture. We're not heading for a boom, but we're also not in a freefall. The slight increase in pending home sales in February, combined with the forecast of moderating mortgage rates and sales growth, suggests a gradual recovery and stabilization over the next two years.
However, I also agree with Yun's point about national debt keeping mortgage rates from plummeting. Don't expect a return to those super-low rates anytime soon. The days of 3% mortgages are likely behind us for a while.
What Does This Mean for You?
- For Buyers: Don't wait for some magical moment of ultra-low rates or huge price drops. The market is likely to become more competitive as sales pick up. If you find a home you love and it fits your budget, now might be a good time to make a move before prices and competition potentially increase further.
- For Sellers: The forecast suggests moderate price growth. It's still a seller's market in many areas, but it's becoming more balanced. Make sure your home is priced competitively and in good condition to attract buyers.
Final Thoughts
The housing market is always evolving. Pending home sales are just one piece of the puzzle, but they are an important indicator. The February 2025 data and NAR's forecast suggest a market that's slowly but surely finding its footing. Keep an eye on mortgage rates and local market conditions, and remember to make informed decisions based on your own personal situation and needs. It's definitely an interesting time to be watching the real estate world!
Pending Home Sales Trends for the Last 12-Months
The table shows data from regarding pending home sales in four regions of the United States – Northeast, Midwest, South, and West. The data reveals interesting trends in pending home sales across the regions. The National Association of Realtors (NAR) publishes monthly data on pending home sales, which is seasonally adjusted and presented in the form of a seasonally adjusted annual rate (SAAR) in thousands.
Here is the tabular data of pending home sales from January 2024 to January 2025. The units displayed are in thousands and are the seasonally adjusted annual rate.
The Pending Home Sales Index Explained
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. According to the National Association of REALTORS®, 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 equals 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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