Lean inventories hold back US pending home sales in February

CONTRACTS to buy previously owned US homes fell in February, held back by a shortage of properties, but there is little to suggest that the housing market's recovery is stalling.

The National Association of Realtors (NAR) said yesterday its pending home sales index, based on contracts signed last month, slipped 0.4 per cent to 104.8.

Still, contracts last month remained at the second-highest level in nearly three years.

There were 1.94m previously owned homes on the market in February, representing a 4.7 months’ supply. The inventory of new single-family homes available for sale during the same period was 150,000, or 4.4 months' worth.

A six months' supply is normally considered as a healthy balance between supply and demand.

While the supply squeeze could dampen the spring selling season a bit, the housing market recovery appears intact. Pending home sales were up 8.4 per cent from February last year.

Earlier this week CoreLogic said so-called shadow inventory – homes either in foreclosure or being held from the market – dropped 15.4 per cent to 2.2m in January from a year ago. That was well below the cycle peak of 3m units in January 2010.

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