Pending Home Sales Index reaches a record
Pending home sales in August increased for the fourth straight month.
The National Association of Realtors (NAR) reported that the Pending Home Sales Index (PHSI) increased 8.8% to a record high of 132.8 in August. The PHSI is a forward-looking indicator of home sales based on contract signings.
“Tremendously low mortgage rates – below 3% – have again helped pending home sales climb in August,” said Lawrence Yun, NAR’s chief economist. “Additionally, the Fed intends to hold short-term fed funds rates near 0% for the foreseeable future, which should in the absence of inflationary pressure keep mortgage rates low, and that will undoubtedly aid homebuyers continuing to enter the marketplace.”
The NAR also reported that year-over-year contract signings jumped 24.2% last month.
Yun noted that he is “pleasantly surprised to see the industry bounce back so strongly and so quickly” from COVID-19 induced setbacks with pending sales reaching an all-time high.
The economist also points out that pending home sales outperforming many pre-pandemic averages. But without increased housing production, the rebound and recovery will not be sustainable.
“Home prices are heating up fast,” he said. “The low mortgage rates are allowing buyers to secure cheaper mortgages, but many may find it harder to make the required down payment.”
Here’s how the PHSI breaks down by region:
- The Northeast PHSI grew 4.3% to 117.1 in August, a 26.0% jump from a year ago.
- In the Midwest, the index rose 8.6% to 124.5 last month, up 25.0% from August 2019.
- Pending home sales in the South increased 8.6% to an index of 154.2 in August, up 23.6% from August 2019.
- The index in the West rose 13.1% in August to 120.3, up 23.6% from a year ago.
The NAR’s Housing Market Recovery Index revealed that some metro areas have recovered and exceeded previous January levels.
Markets showing the biggest recoveries include Seattle-Tacoma-Bellevue, Wash.; Las Vegas-Henderson-Paradise, Nev.; Boston-Cambridge-Newton, Mass.-N.H.; Denver-Aurora-Lakewood, Colo.; and Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.
The full Pending Home Sales Index report from the NAR is available here.