Pending Home Sales Rise 2.0% in February; NAR Projects Stronger Housing Market in 2025

Pending Home Sales Rebound Modestly in February as South Leads Gains

Pending home sales posted a modest gain in February, rising 2.0% month-over-month, according to data released by the National Association of REALTORS® (NAR). While this uptick suggests marginal improvement, contract signings remain well below historical norms, with high mortgage rates continuing to weigh on both supply and demand.

Regional Divergence Highlights Market Pressure

The February gain was uneven across U.S. regions. The South drove the increase, with pending home sales rising 6.2%—the largest regional gain—while the Midwest also edged higher by 0.7%. In contrast, the Northeast saw a 0.9% drop, and the West fell sharply by 3.0%. On a year-over-year basis, contract signings were down across all regions, with the Midwest experiencing the steepest decline at 4.7%.

The Pending Home Sales Index (PHSI) rose to 72.0, still well below the baseline of 100 that reflects 2001 market activity. Overall, pending transactions declined 3.6% compared to the same month a year earlier, underscoring persistent structural hurdles in the housing market.

Mortgage Rates Remain Key Constraint

NAR Chief Economist Lawrence Yun emphasized the role of mortgage rates in dampening market momentum. Despite the monthly rise, Yun noted that “contract signings remain well below normal historical levels.” He added that a decline in mortgage rates would ease affordability concerns and reduce the mortgage rate lock-in effect, which currently discourages existing homeowners from listing their properties.

NAR projects average mortgage rates will settle at 6.4% in 2025, limiting the likelihood of significant affordability improvements. The group forecasts existing-home sales to rise 6% next year, with new-home sales climbing 10% thanks to stronger inventory levels. The national median home price is expected to grow 3% in 2025 as more supply gradually enters the market.

Market Forecast: Neutral-to-Bullish Outlook

While February’s data indicates tentative stabilization, high borrowing costs and soft year-over-year comparisons suggest only a slow recovery. However, the strong performance in the South and improved new-home inventory offer a constructive backdrop. If rates ease further in line with Federal Reserve expectations, housing activity could gain modest traction. Near-term outlook leans neutral-to-bullish, with upside potential contingent on mortgage rate relief.