Pending Home Sales Rise 5.9% in July
In 2020, summer is the new spring, at least for real estate sales. Pent-up demand caused a nationwide boost in pending sales month-to-month and year-to-year.
July’s pending home sales were up again, according to the National Association of Realtors® (NAR) monthly index. It marks three consecutive months of growth, and each of the four regions within the report saw month-over-month and year-over-year gains in pending home sales transactions.
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – 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,” says Lawrence Yun, NAR’s chief economist. “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”
Prospective buyers missed most of the spring buying season due to pandemic-induced lockdown measures; but with most states at least partially reopened, the market is seeing higher-than-usual activity from the pent-up demand. And Yun says that nothing indicates contract activity will wane in the immediate future, particularly in the suburbs.
Yun forecasts existing-home sales to ramp up to 5.8 million in the second half of 2020. That expected rebound would bring the full-year level of existing-home sales to 5.4 million – a 1.1% gain compared to 2019.
Yun projects existing-home sales will 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 averaging 3.2%.
“Anecdotally, Realtors are telling me there’s no shortage of clients or home seekers, but that scarce inventory remains a problem,” Yun adds. “If 20% more homes were on the market, we would have 20% more sales, because demand is that high.”
In the new-home market, Yun expects housing starts to average at 1.35 million in 2020 and to pick up in 2021, to 1.43 million.
July Pending Home Sales by region: All four regional indices recorded increases in contract activity on a month-over-month basis in July. 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 sales in the South increased 0.9% to an index of 142.0, up 14.9% from July 2019. The index in the West rose 6.8% to 106.4, up 13.2% from a year ago.
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