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March pending home sales increased 3.4%, according to the National Association of Realtors. While the Midwest recorded a loss, the Northeast, South, and West posted monthly gains in transactions. Year over year, the Northeast and South registered decreases, but the Midwest and West increased.

The Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—increased to 78.2 in March. Pending transactions were up 0.1% year over year. An index of 100 is equal to the level of contract activity in 2001.

"March's Pending Home Sales Index—at 78.2—marks the best performance in a year, but it still remains in a fairly narrow range over the last 12 months without a measurable breakout," says NAR chief economist Lawrence Yun. "Meaningful gains will only occur with declining mortgage rates and rising inventory."

"Home prices rising faster than income growth is not healthy and adds challenges for first-time buyers," adds Yun.

Regionally, the Northeast PHSI increased 2.7% from last month to 65.1, a decline of 0.3% from March 2023. The Midwest index dropped 4.3% to 78.1 in March, up 1.3% from one year ago.

Dropping 1.5% from the prior year, the South PHSI advanced 7% to 95.8 in March, while the West index increased 6.8% in March to 61, which is up 3.6% from March 2023.

"Home sales have lingered at 30-year lows, and since 70 million more Americans live in the country now compared to three decades ago, it's inevitable that sales will rise in coming years," says Yun. "Inventory will grow steadily from more home construction, and various life-changing events will require people to trade up, trade down, or move to another location."

In NAR’s quarterly economic forecast, NAR expects existing-home sales will rise by 9% in 2024 to 4.46 million (from 4.09 million in 2023) and another 13.2% in 2025 to 5.05 million. Housing starts are predicted to rise by 1.2% in 2024 to 1.43 million (from 1.413 million in 2023) and 4.9% to 1.5 million in 2025.

Yun further notes, "Inventory will gradually rise from recent growth in home building. Additionally, many sellers who delayed listing in the past two years will start putting 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."

NAR expects that median home prices will increase by 1.8% in 2024 to a record of $396,800 (from $389,800 in 2023) and another 1.8% in 2025 to $403,800. Reflecting the building of smaller-sized homes, NAR forecasts a modest reduction of 0.6% in the median new-home price to $426,100 in 2024 (from $428,600 in 2023), but it anticipates the median new-home price will leap 3.4% to $440,500 in 2025.

NAR expects home sales to steadily improve, while home prices continue to hit record highs.

"Job gains, steady mortgage rates, and the release of inventory from pent-up home sellers will lead to more sales," says Yun. "Given the lingering housing shortage, home prices will march higher, albeit much more slowly than in the past."