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Pending home sales rose 1.6% in February, according to the National Association of Realtors. The Midwest and South posted monthly gains, while the Northeast and West recorded losses. All four U.S. regions registered year-over-year decreases.

In February, the Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—increased to 75.6. An index of 100 is equal to the level of contract activity in 2001. Pending transactions were down 7% compared with February 2023.

"While modest sales growth might not stir excitement, it shows slow and steady progress from the lows of late last year," says NAR chief economist Lawrence Yun. "Ongoing job gains are clearly increasing demand along with more inventory."

From January, the Northeast PHSI decreased 0.3% to 63.4, a decline of 9% from February 2023. The Midwest index jumped 10.6% to 81.6 in February, down 2.5% from one year ago.

In the South, the PHSI rose 1.1% to 89.5 in February, falling 8.5% from the prior year. The West’s index fell 6.5% in February to 57.1, down 7.9% from one year prior.

"The high-cost regions in the Northeast and West experienced pullbacks due to affordability challenges," says Yun. "Home prices rising faster than income growth is not healthy and adds challenges for first-time buyers."

Yun further adds, "There will be a steady rise in inventory from recent growth in home building. Additionally, many sellers, who delayed listing in the past two years, will begin to put their homes on the market to move to a different home that better fits their new life circumstances—such as changes in family composition, jobs, commuting patterns, and retirees wanting to be closer to their grandkids."