Home purchase contract signings were 1.8% higher in February than January but still 0.8% lower than a year ago as homebuying demand continues to lag at the start of 2026.
Only the Northeast failed to see a monthly increase in pending home sales, according to new data released Tuesday by the National Association of Realtors (NAR). The Midwest joined the Northeast in lagging on an annual basis, while the South and West posted gains.
“The slight gain in pending contracts appears to be driven by improved affordability conditions,” said NAR Chief Economist Lawrence Yun, issuing an affordability warning in a statement accompanying the monthly figures that improvements “could reverse if higher oil prices lead to an uptick in mortgage rates.”
Though the contract signings data unveiled Tuesday precedes the outbreak of hostilities, the war with Iran started by the U.S. and Israel on Feb. 28 has already raised mortgages rates, to between 6.1% and 6.2% as of the second week of March, according to Mortgage Bankers Association (MBA) and Freddie Mac data.
Pending sales provide an indicator of upcoming closed home sales, though the duration between pending contracts and completed sales can vary from a few weeks to a few months. Some pending contracts fall through and never translate to closed sales.
Lisa Sturtevant, chief economist at multiple-listing service Bright MLS, said in an email to Scotsman Guide that Tuesday’s contract data and rising macroeconomic uncertainty indicate that “the start of the spring homebuying season is delayed,” with implications on transaction volumes potentially for months to come.
“The conflict with Iran introduced a whole new set of concerns to the economy and the housing market as oil prices surged and a potential resolution of the conflict has become more uncertain,” said Sturtevant. “If the conflict is prolonged, the spring housing market could not just be delayed but be much less robust than predicted earlier this year.”
Ultimately, a range of housing indicators recently reported by the Realtor association paints a picture of a housing market that, while balancing seasonality with the friendliest purchase conditions that buyers have seen in years, nevertheless lagged year-ago sales activity even before the start of regional war in the Middle East.
Pending home sales were 0.4% lower annually in January, compared to the 0.8% yearly decline in February, while closed existing-home sales were down 4.4% and 1.2% year over year in January and February, respectively. The housing market remains structurally challenged by mortgage rate lock-in effects and high home prices, though the stuck joints of housing finance have loosened in recent months.
“While recent mortgage rate volatility may weigh on buyer sentiment at the margin, the market is entering spring on firmer footing than it was a year ago,” commented Sam Williamson, senior economist at First American Financial Corp., sharing his reaction to the latest contract data with Scotsman Guide.
“If those trends hold, they could provide a more supportive backdrop for stronger sales activity in the months ahead,” he added, citing “stronger buying power, persistent pent-up demand and gradually improving inventory continuing to support buyer interest.”
An earlier indicator of sales contract activity, rate-lock volumes for homebuyers purchasing with mortgages, show year-over-year purchase demand increased 5% in February. Mortgage rates that have reset higher since the onset of a global energy supply shock stemming from the Iran war are likely to curb the momentum that lower rates and a slight reprieve in oppressive winter weather had induced.
Building upon momentum begun in the last week of February, purchase application volumes remained resilient in the first week of March, rising 7.8% on a seasonally adjusted basis from the same week a year ago, the MBA previously reported.
Monthly mortgage payments inclusive of principal, interest, property taxes and insurance to buy the average-priced home with a 20% downpayment and 30-year fixed rate were down $186 year over year in February, a decline of 8% to $2,063. That remained more than 33% higher than December 2019 levels, according to ICE Mortgage Technology data.
According to NAR data, the median downpayment size was 19% for all buyers in 2025, with median downpayments of 23% of purchase price offsetting the 10% median downpayment used by first-time buyers last year.
A consumer survey conducted by the University of Michigan in early March found economic sentiment falling sharply after the outset of the war, signaling how rising geopolitical uncertainty amid renewed inflation fears, volatile tariff policies and weak job creation may deepen rather than alleviate the caution and cost concerns keeping many prospective homebuyers sidelined.
Pending home sales saw their largest monthly gain in February in the Midwest, which posted a 4.6% increase in contract activity, followed by a 2.7% increase in the South. On a yearly basis, pending sales rose 3.2% in the West while plunging 12.1% in the Northeast.
