The National Association of Realtors said Thursday that its seasonally adjusted pending home sales index climbed 3.4 per cent to 112.4 last month. It's the fourth consecutive monthly gain. The index now stands at its highest level since May 2006.
"The confidence has returned to housing, not only as shelter but as a good long-term investment," said Ron Peltier, CEO of Berkshire Hathaway's real estate affiliate, HomeServices of America.
The upswing comes after a year of strong hiring, which has heightened demand to buy houses. Increased sales should help bolster the economy, but the surge could potentially destabilize the housing market, Peltier cautioned. Inventories remain low, causing home values to rise at a pace that is eclipsing wage growth.
Signed contracts are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.
Pending sales increased in the Northeast, Midwest and South, while barely edging upward in the West. Greater demand has fueled sales growth this year after a lacklustre 2014. Still, there is evidence that limited inventories are beginning to weigh on the market.
Sales of existing homes fell slightly between April and March to an annual clip of 5.04 million last month, the Realtors reported last week. The decrease may reflect complications in finalizing sales in addition to the shortage of listings.
The inventory of homes listed for sale has declined 0.9 per cent over the past year, so would-be buyers have fewer choices and may face bidding wars.
On average, existing homes sold in 39 days last month, versus 52 days in March and 62 days in February, the Realtors said.
Employers have hired 3.1 million new workers over the past 12 months. But wages are rising at a 2.1 per cent annual clip, about four times slower than prices of existing homes.
Nationwide, the median price of an existing home surged 8.9 per cent over the past 12 months to $219,400.
Unless home values level off because more supply comes onto the market, economists warn that buyers will be priced out of the market and sales will suffer.
Still, there is tremendous pressure on buyers to find homes quickly, since average rates for 30-year, fixed mortgages may start to climb from the relatively low sub-4 per cent level.
A new analysis by Realtor.com indicates nationwide that waiting one year to buy will subtract $18,672 from the benefits of owning over the course of 30 years.