The National Association of Realtors said Monday that its seasonally adjusted pending home sales index climbed 3.1 per cent to 106.9 last month, the highest reading since June 2013.
Buying activity jumped in the Midwest and West, while dipping slightly in the Northeast and South. The gains suggest that housing should overcome the recent hurdles of freezing weather and blistering snowstorms, as both buyers and potentially sellers return to the market.
Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.
The upturn suggests a solid spring sales rebound, after a lacklustre winter. But unlike last year when sales fell, the spring buying season opens after more than a year of robust hiring that has pulled the unemployment rate down to 5.5 per cent, the lowest level in nearly seven years.
"What's different this time is that the surge in the pace of payroll growth means that the pool of prospective homebuyers is now rising more rapidly than at any time since the crash," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Existing homes sold at an annual pace of 4.88 million in February, slightly below last year's levels, according to the Realtors. Prospective buyers were finding slim pickings as the supply of homes was just 4.6 months, compared to five full months a year ago and an average closer to six months in healthy housing markets.
But solid hiring over the past year and historically low mortgage rates may help to ease the affordability pressures from tight supplies.
Average 30-year fixed rates were 3.69 per cent last week, according to the mortgage giant Freddie Mac. That average has plunged from a 52-week high of 4.41 per cent, a sharp decrease that makes it easier to purchase more expensive homes.
Similarly, job gains should give consumers more financial flexibility to buy homes.
Employers have added 3.3 million jobs over the past 12 months, including 295,000 jobs in February. That rapid clip of hiring has caused the unemployment rate to tumble to 5.5 per cent from 6.7 per cent. As the total number of paychecks have increased in the economy, more buyers should be able to afford a home, economists say.
The one missing piece in the housing rebound remains wage growth.
Earnings have risen at drastically slower rate than home prices, putting many houses out of reach financially.
Over the past two years, homes nationwide outpaced wage growth by a 13-to-1 ratio, according to RealtyTrac, the housing data provider. Home prices have risen 17 per cent since the middle of 2012 when the market bottomed out, while median wages have risen just 1.3 per cent, RealtyTrac said.
But that might prove to be a positive, since modest wage gains should put a cap on how high prices can go and improve affordability in the coming years.
"Those markets with the biggest disconnect between price growth and wage growth during the last two years are most likely to see plateauing home prices in 2015 until wages catch up," said Daren Blomquist, a vice-president at RealtyTrac.