Pending home sales climb in July

Pending home sales gained ground for the third consecutive month, according to the National Association of Realtors.

The Pending Home Sales Index (PHSI) rose 5.9% to 122.1 in July. Year-over-year, contract signings rose 15.5%. An index of 100 is equal to the level of contract activity in 2001.’

“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” said Lawrence Yun, chief economist of the NAR. “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”

While home buyers missed most of the spring buying season due to pandemic-induced lockdown measures, buying activity is now robust from pent-up demand, the NAR said.

According to Yun, there are no indications that contract activity will wane in the immediate future, particularly in the suburbs. The National Association of Home Builders has confirmed that an urban exit is taking place with potential home buyers leaving cities and larger metro markets.

Yun forecasts existing-home sales to ramp up to 5.8 million in the second half. That rebound would bring the full-year level of existing-home sales to 5.4 million, a 1.1% gain compared to 2019.

The economist also projects existing-home sales to reach 5.86 million in 2021, supported by an economy that he expects to expand by 4% and a low interest rate environment, with the 30-year mortgage rate average of 3.2%.

“Anecdotally, realtors are telling me there is no shortage of clients or home seekers, but that scarce inventory remains a problem,” Yun said. “If 20% more homes were on the market, we would have 20% more sales, because demand is that high.” 

Additionally, Yun has forecast housing starts to average at 1.35 million in 2020 and to pick up in 2021, to 1.43 million.

Here's how pending home sales for July break down by region:

• The Northeast PHSI grew 25.2% to 112.3 in July, a 20.6% jump from a year ago. 
• In the Midwest, the index rose 3.3% to 114.6 last month, up 15.4% from July 2019.
• Pending home sales in the South increased 0.9% to an index of 142.0 in July, up 14.9% from July 2019. 
• The index in the West rose 6.8% in July to 106.4, up 13.2% from a year ago.