• Pending home sales rose 2.0% month-over-month in February, beating expectations of a 1.0% gain.
  • Year-over-year sales fell 7.2%, reflecting ongoing affordability challenges in the housing market.
  • Market faces persistent headwinds from elevated mortgage rates and home prices despite slight monthly improvement.

Housing Market Shows Tentative Signs of Life

US pending home sales unexpectedly climbed 2.0% in February compared to January, surpassing economists' projections of a 1.0% increase. The monthly gain suggests some buyers may be adapting to current market conditions, though the housing sector continues to face significant challenges.

However, the year-over-year comparison paints a less optimistic picture, with pending transactions down 7.2% from February 2024 levels. This persistent annual decline highlights how elevated borrowing costs and home prices continue to weigh on the market.

Affordability Challenges Persist

The average 30-year fixed mortgage rate hovered around 6.84% in late February, keeping financing costs high for potential buyers. While inventory showed modest improvement - up 5.1% from January and 17% year-over-year to 1.24 million units - supply remains well below historical averages.

"We're seeing some buyers return to the market as they adjust their expectations," said one industry analyst who asked not to be named because they weren't authorized to speak publicly. "But the fundamental affordability issues haven't gone away."

Cautious Optimism for 2025

The National Association of Realtors predicts a 9% increase in home sales for 2025 compared to 2024, suggesting some experts see potential for gradual improvement. Existing home sales already showed strength in February, rising 4.2% month-over-month to an annual rate of 4.26 million.

Still, most forecasts suggest mortgage rates will remain above 6% throughout the year, while home prices continue their upward trajectory - the median existing-home price rose 3.8% year-over-year to $398,400 in February. Without significant inventory growth or rate relief, many would-be buyers may remain sidelined.