WASHINGTON (April 27, 2016) – Pending home sales increased slightly in March for the second consecutive month and reached their highest level in almost a year, according to the National Association of Realtors. Only the West region saw a decline in contract activity last month.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, climbed 1.4% to 110.5 in March from an downwardly revised 109.0 in February and is now 1.4% above March 2015 (109.0). After last month’s slight gain, the index has increased year-over-year for 19 consecutive months and is at its highest reading since May 2015 (111.0).

Lawrence Yun, NAR chief economist, says last month’s pending sales increase signals a solid beginning to the spring buying season. “Despite supply deficiencies in plenty of areas, contract activity was fairly strong in a majority of markets in March,” he said. “This spring’s surprisingly low mortgage rates are easing some of the affordability pressures potential buyers are experiencing and are taking away some of the sting from home prices that are still rising too fast and above wage growth.”

In the short-term, the healthy labor market and favorable borrowing costs should lead to sustained buyer demand and a durable pace of sales. However, Yun says the consequences from a failure to construct more single-family homes in recent years are starting to impact some top job producing markets, where endless supply shortages continue to limit choices for buyers and are driving up prices beyond what a growing share of households can comfortably afford.

“Demand is starting to weaken in some areas, particularly in the West, where the median home price has risen an astonishing 38% in the past three years,” adds Yun. “As a result, pending sales in the region have now declined in four of the last five months and are lower than one year ago for the third month in a row. Closed sales in the region in March were also below last year’s pace.”

The PHSI in the Northeast increased 3.2% to 97.0 in March, and is now 18.4% above a year ago. In the Midwest the index inched up 0.2% to 112.8 in March, and is now 4.0% above March 2015.

Pending home sales in the South rose 3.0% to an index of 125.4 in March but are still 0.6% lower than last March. The index in the West declined 1.8% in March to 95.3, and is now 7.9% below a year ago.