Contracts to purchase previously owned homes in the United States have grown unexpectedly in February amid a decline in mortgage rates, but the war in the Middle East could prevent further gains.
Pending sales in February rose 1.8% from the previous month and 0.8% year-over-year, according to the National Association of Realtors Pending Home Sales Report.
Economists polled by Reuters predicted that contracts would fall by 0.5% month-over-month.
This comes as mortgage rates eased at the start of the year after President Donald Trump ordered government-backed mortgage firms Fannie Mae and Freddie Mac to expand purchases of mortgage-backed securities.
However, mortgage rates have begun to climb in recent weeks due to the U.S.-Israel war with Iran, boosting oil prices and U.S. Treasury yields.
Mortgage rates track the benchmark 10-year Treasury yield.
“The slight gain in pending contracts appears to be driven by improved affordability conditions,” NAR chief economist Lawrence Yun said.
“However, those conditions could reverse if higher oil prices lead to an uptick in mortgage rates.”
Home sales rose in the Midwest, South, and West but declined in the Northeast month-over-month. They rose in the south and west and fell in the northeast and midwest year-over-year.
“The Midwest—the most affordable region of the country—was the strongest performer in February,” Yun said.
“But the Northeast was held back by a combination of higher home prices and a shortage of supply.”
These figures come before the November midterm elections, where housing affordability has become an increasingly important issue.
Recently, the country’s largest housing affordability bill in three decades passed in the Senate.
The bill would boost the supply of housing and ban investors from buying single-family homes.
However, the bill still faces an uphill battle in the House.
There is also still a critical shortage of starter homes.
Builders have not ramped up single-family home construction because of expensive building materials resulting from Trump's import tariffs. Labour shortages due to the administration's immigration crackdown are also adding to costs for builders.
