Pending home sales rose for the second straight month in March, though lack of inventory is still having a negative effect on the market, according to a recent report by the National Association of Realtors.

The Pending Home Sales Index (PHSI) increased 0.4 percent, from 107.2 in February to 107.6 in March. Despite this increase, the index is still down on a year-over-year basis (by 3 percent) for the third consecutive month. In the South, the PHSI increased by 2.5 percent to 128.6 in March — 0.3 percent higher than March of last year. 

“Healthy economic conditions are creating considerable demand for purchasing a home, but not all buyers are able to sign contracts because of the lack of choices in inventory,” said Lawrence Yun, chief economist for the NAR. “Steady price growth and the swift pace listings…are proof that more supply is needed to fully satisfy demand.”

Yun currently predicts about 5.61 million home sales for the year — an increase from 5.51 million last year. The median price for an existing-home is expected to increase around 4.4 percent. Last year, existing-home sales increased 1.1 percent, while the median price rose 5.8 percent.

Housing affordability is expected to play a huge role in home sales, according to Yun. “Much of the country is enjoying a thriving job market, but buying a home is becoming more expensive.”

Because of the high price of homes, inventory in both new and existing homes needs to increase substantially, “otherwise sales will remain stuck in this holding pattern and a growing share of would-be buyers – especially first-time buyers – will be left on the sidelines,” said Yun.