Higher home prices and low inventory may have sparked a slight drop in pending sales in Sept., but the number still surged 20.5% when compared to Sept. 2019.
WASHINGTON – After four straight months of contract activity growth, pending home sales declined slightly in September by 2.2% after four months of gains. The Northeast was the only region registering a month-to-month gain.
However, pending sales remain robust in a year-to-year comparison, up 20.5% compared to one year ago, according to the National Association of Realtors® (NAR). The Pending Home Sales Index (PHSI) is a forward-looking indicator of home sales based on contract signings. An index of 100 equals the level of contract activity in 2001.
“The demand for home buying remains super strong, even with a slight monthly pullback in September, and we’re still likely to end the year with more homes sold overall in 2020 than in 2019,” says Lawrence Yun, NAR’s chief economist. “With persistent low mortgage rates and some degree of a continuing jobs recovery, more contract signings are expected in the near future.”
Yun also expects a “second-order demand” made up of “homeowners who had not considered moving before the pandemic” – owners now thinking about “moving into larger homes in less densely populated areas in light of new-found work-from-home flexibility.”
NAR breaks the full pending home sales index into four U.S. areas, and three of four regional indices recorded decreases in contract activity on a month-over-month basis in September. The Northeast PHSI was the only one to grow – at 2.0% to 119.4 – in September, a 27.7% increase from a year ago.
In the Midwest, the index slid 3.2% to 120.5 last month, up 18.5% from September 2019. Pending sales in the South decreased 3.0% to an index of 150.1 in September, up 19.6% from September 2019; and the index in the West fell 2.6% in September to 116.8, up 19.3% from a year ago.
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