Pending home sales rose modestly last month, but remained close to January’s record low, in a possible signal of continued weak buying activity this spring.
The Pending Home Sales Index (PHSI) grew 2% in February from the prior month after seasonal adjustment, the National Association of Realtors® reported Thursday.
However, pending transactions declined 3.6% from the same month in 2024, which went on to be the weakest year for home sales since 1995.
Based on contract signings for previously owned homes, pending sales are a forward-looking indicator of existing home sales and usually translate to completed purchases in one to two months.
“Despite the modest monthly increase, contract signings remain well below normal historical levels,” said NAR Chief Economist Lawrence Yun. “A meaningful decline in mortgage rates would help both demand and supply—demand by boosting affordability, and supply by lessening the power of the mortgage rate lock-in effect.”
February’s gain followed an all-time low for pending home sales in January, when mortgage rates spiked above 7% and severe winter storms rolled across much of the nation, potentially suppressing an already weak housing market.
Economists have been watching to see if home sales indicators rebounded sharply in February, which would suggest some homebuyers simply delayed their home shopping in February due to weather impacts.
Sales of new and existing homes did bounce back last month, rising 1.8% and 4.2% respectively on a seasonally adjusted basis.
Still, both figures remain well below historic norms, as elevated mortgage rates and affordability challenges push many buyers to the sidelines.
“Housing affordability remains the chief concern of many hopeful buyers, and any improvement in housing costs is met with an uptick in activity,” says Realtor.com® Senior Economic Research Analyst Hannah Jones.
Pending home sales rose only in Midwest and South
On a monthly basis, pending transactions rose only in the Midwest and the South. The South saw the biggest rebound, up 6.2% from January, while the Midwest eked out a modest gain of 0.7%.
Meanwhile, pending sales dropped 3% in the West and declined 0.9% in the Northeast compared with January.
On an annual basis, pending transactions dropped in every region, with the Midwest seeing the greatest decline at 4.7%.
The annual decline in every region is of particular concern, since 2024 was the weakest year for home sales in nearly 30 years.
Although there is still plenty of time for the market to rebound in 2025, the early signs from January and February have been less than encouraging. Elevated mortgage rates remain a key factor, further crimping affordability in a market already plagued by high prices.
Mortgage rates hit a recent peak at just above 7% in mid-January but then began drifting down modestly each week through early March, potentially offering homebuyers a chance to lock in a lower rate.
“As the weather and the housing market warm into the spring, mortgage rates have softened slightly, offering sidelined buyers the opportunity to get into the market,” says Jones. “However, many households are still priced out, opting to take advantage of easing rents to minimize housing costs.”
Keith Griffith is a journalist at Realtor.com covering housing policy, real estate news, and trends in the residential market. Previously, his work has appeared in Business Insider, The Street, Chicago Sun-Times, New York Post, and Daily Mail, among other publications. He has a master’s degree in economic and business journalism from Columbia University.