Pending home sales slide in September

Pending home sales receded in September, the National Association of Realtors reported today.

Following a month of growth, the Pending Home Sales Index (PHSI) declined 2.3% to 116.7 in September. All four major U.S. regions saw month-over-month declines in contract activity.

The PHSI is a forward-looking indicator of home sales based on contract signings. Year-over-year, signings decreased 8%. An index of 100 is equal to the level of contract activity in 2001.

“Contract transactions slowed a bit in September and are showing signs of a calmer home price trend, as the market is running comfortably ahead of pre-pandemic activity,” said Lawrence Yun, the NAR’s chief economist. “It’s worth noting that there will be less inventory until the end of the year compared to the summer months, which happens nearly every year.”

According to Yun, some potential buyers have put their home search on pause with plans to resume in 2022.

Although housing supply remains low, Yun says he expects inventory to turn the corner in 2022.

“Rents have been mounting solidly of late, with falling rental vacancy rates,” Yun said. “This could lead to more renters seeking homeownership in order to avoid the rising inflation, so an increase in inventory will be welcomed.”

Earlier this week, the U.S. Department of Housing and Urban Development and the U.S. Census Bureau reported that new home sales jumped in September fueled by solid demand, low existing inventory, and the possibility of higher mortgage rates.

Sales of newly built, single-family homes in September rose 14% to an 800,000 seasonally adjusted annual rate from a downwardly revised reading in August.

Regarding pending home sales, there are markets that continue to remain hot.

NAR data revealed that out of the largest 40 metros, the most improved metros over the past year, as of October 21, were Orlando-Kissimmee-Sanford, Fla.; Jacksonville, Fla.; Tampa-St. Petersburg-Clearwater, Fla.; Nashville-Davidson-Murfreesboro-Franklin, Tenn.; and Denver-Aurora-Lakewood, Colo.

Once all home sale data has been tabulated by year’s end, NAR expects home sales to have risen by 6.4% in 2021; and due to higher anticipated mortgage rates, NAR projects sales to then decline by 1.7% in 2022. 

Yun says home prices will moderate with only 2.8% growth in 2022 after a double-digit price gain of 14.7% in 2021.

Here’s how pending home sales break down by region:

• Month-over-month, the Northeast PHSI fell 3.2% to 93.1 in September, an 18.5% decline from a year ago. 
• In the Midwest, the index dropped 3.5% to 111.4 last month, down 5.8% from September 2020.
• Pending home sales transactions in the South decreased 1.8% to an index of 139.1 in September, down 5.8% from September 2020. The index in the West declined 1.4% in September to 105.3, down 7.2% from a year prior.