Pending home sales bounce back in October

Pending home sales made a comeback in October, the National Association of Realtors reports.

After declining in September, the Pending Home Sales Index (PHSI) increased 7.5% to 125.2 in October. The PHSI is a forward-looking indicator of home sales based on contract signings.

Year-over-year, signing slipped 1.4%. An index of 100 is equal to the level of contract activity in 2001.

“Motivated by fast-rising rents and the anticipated increase in mortgage rates, consumers that are on strong financial footing are signing contracts to purchase a home sooner rather than later,” said Lawrence Yun, NAR’s chief economist. “This solid buying is a testament to demand still being relatively high, as it is occurring during a time when inventory is still markedly low.

Yun also noted that the gain in October’s gains assures that total existing-home sales in 2021 will exceed 6 million, which will shape up to be the best performance in 15 years.

While the market is expected to remain robust, Yun forecasts home prices will rise at a gentler pace over the course of the next several months and expects demand to be milder as mortgage rates increase. 

Realtor.com’s Hottest Housing Markets data revealed that out of the largest 40 metros, the most improved metros over the past year, as of November 18, were Orlando-Kissimmee-Sanford, Fla.; Jacksonville, Fla.; Tampa-St. Petersburg-Clearwater, Fla.; Dallas-Fort Worth-Arlington, Texas; and Nashville-Davidson, Tenn.

Here’s how existing-home sales performed on a regional basis:

• In the Northeast, the PHSI increases 6.9% to 99.5 but is down 10% from a year ago.
• In the Midwest, the PHSI climbed 11.8% to 124.6 and is also up 5.1% from October 2020.
• In the South, pending home sales rose 8% to an index of 149.7 in October, up 0.6% from October 2020. 
• The index in the West grew 2.1% in October to 107.5, down 6.2% from a year prior.