US pending home sales fall more than expected in February

US pending home sales fell more than expected in February, according to the latest figures from the National Association of Realtors.

The NAR's monthly index declined 1% from January to 101.9 last month, which was a little worse than expectations of a 0.5% drop. Meanwhile, year-over-year contract signings dropped 4.9%, marking the fourteenth straight month of annual decreases.

The NAR's chief economist, Lawrence Yun, pointed out that the February decline is coming off a solid gain in the previous month.

"In January, pending contracts were up close to 5%, so this month’s 1% drop is not a significant concern," he said. "As a whole, these numbers indicate that a cyclical low in sales is in the past but activity is not matching the frenzied pace of last spring."

The pending home sales index in the Northeast fell 0.8% to 92.1 in February, while the index for the Midwest was down 7.2% to 93.2. For the South, the index ticked up 1.7% to 121.8 last month, while the gauge for the West rose 0.5% to 87.5.

Yun said that despite the growth in the West, the region’s current sales are well below the sales activity from 2018.

"There is a lack of inventory in the West and prices have risen too fast. Job creation in the West is solid, but there is still a desperate need for more home construction," he said.

Yun expects existing home sales for the year to fall 0.7% to 5.30 million, and for the national median existing home price to increase around 2.7%.

Pantheon Macroeconomics said that as the February dip follows a 4.3% in January, the downward trend of last year appears to have been broken.

"Activity was sharply depressed in 2018 by the capping of state and local tax deductions, but perhaps a new, lower equilibrium now has been reached.

"February existing home sales hugely outperformed the January pending sales numbers, and today’s report strongly suggests we should expect a substantial drop in March. But with mortgage demand strengthening in the wake of the decline in mortgage rates, we look for better sales in the second quarter."