Contracts to buy previously owned U.S. homes jumped to a 10-month high in February, pointing to robust demand for housing ahead of the busy spring selling season.
The report on Wednesday from the National Association of Realtors suggested higher home prices and mortgage rates were having little impact on the housing market for now, underscoring the economy’s resilience despite an apparent slowdown in growth in the first quarter.
The NAR said its Pending Home Sales Index, based on contracts signed last month, surged 5.5 percent to 112.3. That was the highest reading since April and the second best showing since May 2006.
“This bodes well for home sales this spring,” said Misa Batcheller, an economic analyst at Wells Fargo Securities in Charlotte, North Carolina.
Contract signing last month was likely boosted by unseasonably warm temperatures. The gains reversed January’s 2.8 percent drop. Pending home contracts become sales after a month or two, and last month’s surge implied a pickup in home resales after they tumbled 3.7 percent in February.
Economists had forecast pending home sales rising 2.4 percent last month. Pending home sales increased 2.6 percent from a year ago.
U.S. financial markets were little moved by the data as investors assessed comments from Federal Reserve officials on further interest rate increases this year. Chicago Fed President Charles Evans, one of the U.S. central bank’s most consistent supporters of low interest rates, said he supported additional monetary policy tightening this year.
The Fed raised its benchmark overnight interest rate by a quarter percentage point earlier this month and has forecast two more rate hikes this year. The dollar was trading higher against a basket of currencies while U.S. stocks were mixed. U.S. government bond prices rose.
Demand for housing is being driven by a strong labor market, which is generating wage increases, as it nears full employment. Sales activity, however, remains constrained by tight inventories, which are driving up home prices.
“The good news is that warm winter weather has led to a surge in construction that will hopefully result in a bloom of new homes for sale this spring,” said Joseph Kirchner, senior economist at realtor.com.
A report on Tuesday showed home prices increased 5.7 percent in January on a year-on-year basis. The NAR expects sales of previously owned homes to increase 2.3 percent this year to around 5.57 million units.
Existing homes sales increased 3.8 percent last year. Housing market strength suggests an apparent sharp slowdown in economic growth early in the first quarter is likely temporary.
The Atlanta Fed is forecasting gross domestic product increasing at a 1.0 percent annualized pace in the first quarter. The economy grew at a 1.9 percent rate in the final three months of 2016.
Given labor market strength, economists expect only a modest impact from higher mortgage rates. The 30-year fixed mortgage rate is currently at 4.23 percent, below a more than 2-1/2-year high of 4.32 percent hit in December.
In a separate report on Wednesday, the Mortgage Bankers Association said applications for home purchase loans rose 1.2 percent last week from the prior week. It was the fourth increase in the past five weeks.