More Americans signed contracts to buy homes in February, as the National Association of Realtors Pending Home Sales Index rose by an impressive 8.2%. That brings the index to 97.6, just below where it stood in December at 97.8. What's caused February's steep rise?
According to NAR, the home buyer credit's April 30th expiration is a big part of the cause. Pending home sales are forward-looking. These sales haven't actually been completed yet but signal more buyers in the market deciding to make a purchase. That's why February home sales were quite weak, but pending sales were much stronger.
So what you're likely seeing here is future demand being pulled forward by the credit, which is set to expire in November. To try to determine how much of the credit has to do with it, let's look at what happened last fall. Here's what the index looks like since December 2008:
As you can see, there was a steady rise until November, when it plummeted a drastic 14%. It ticked up slightly in December, but then fell again in January. The net result over that three month span was a decline of 20%. Here's a graph looking at month-over-month change:
What we're seeing in February should look somewhat similar to what we saw in September, as each month was two prior to the credit's set expiration. Let's consider the two charts together. In September, home sales rose by 4.6% -- much lower than February's big 8.2% gain. That could have something to do with how much higher the index was in August than January, 103 vs. 97.6. In February home buyers had much more ground to make up after that big 20% decline from the prior 3 month period.