February contracts rose, but oil and rate shocks kept optimism in check
Pending home sales in February edged up even as war-driven oil shocks and shaky mortgage rates kept the housing outlook uncertain for lenders and originators.
The National Association of Realtors’ Pending Home Sales Index rose 1.8% from January but remained 0.8% below a year earlier. The index climbed to 72.1, surprising forecasters who expected a small decline.
Month over month, contract signings increased in the Midwest, South and West and fell in the Northeast.
On a yearly basis, pending sales rose in the South and West and declined in the Northeast and Midwest, extending a pattern where more affordable or faster-growing regions outperformed coastal markets.
“The slight gain in pending contracts appears to be driven by improved affordability conditions. However, those conditions could reverse if higher oil prices lead to an uptick in mortgage rates,” NAR chief economist Lawrence Yun said.
He added that “the Midwest—the most affordable region of the country—was the strongest performer in February. But the Northeast was held back by a combination of higher home prices and a shortage of supply.”
Affordability bump met rising-rate risk
Mortgage rates dipped toward 6% in February, briefly falling below that threshold for the first time since 2022, before climbing again as the Iran war sent oil and Treasury yields higher.
“As far as its impact on the market, what people didn't realize was war was inflationary,” broker-owner Amir Nurani previously said, warning that rate sheets could stay volatile as energy prices spiked.
For many would-be buyers, especially at the entry level, Yun stressed that timing remained complicated.
“For first-time homebuyers, purchasing a home is not a snap decision,” he said.
“It takes time to build credit, save for a down payment, and fulfill existing rental lease agreements. Still, there is sizable pent-up demand that could be released into the market. Although job gains have been sluggish in recent months, there are still 6 million more jobs in the country than in the pre-COVID period.”
Regional split underscored a two-speed market
NAR’s regional data showed February contract signings down 3.6% month over month in the Northeast and 12.1% year over year. The Midwest posted a 4.6% monthly gain and was roughly flat on the year.
The South logged a 2.7% monthly and 1.2% annual increase. The West saw gains of 0.9% and 3.2% respectively, with metros such as San Diego, Jacksonville and San Jose among the strongest year-over-year performers.
For mortgage professionals, February’s rebound in contract signings offered a modest but fragile signal that slightly lower rates and easing prices started to coax buyers back into the market.
With headline risks from oil and geopolitics still feeding into bond yields, originators and brokers must treat the uptick as an opening, not a turning point, and prepare borrowers for a spring selling season where affordability could tighten just as quickly as it improved.
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