Pending Home Sales At Record High in August

This morning the National Association of Realtors released the August data for their Pending Home Sales Index. Here is an excerpt from the latest press release:

"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 undoubtably aid homebuyers continuing to enter the marketplace."

"While I did very much expect the housing sector to be stable during the pandemic-induced economic shutdowns, I am pleasantly surprised to see the industry bounce back so strongly and so quickly."

Yun notes that while pending contracts are at an all-time high, that will not necessarily translate to a record number of home sales because not all contracts lead to closings and due to sampling size variations. He also points out that pending home sales are outperforming many pre-pandemic averages, but says that without matching supply, the recovery will not be sustainable. (more here)

The chart below gives us a snapshot of the index since 2001. The MoM came in at 8.8%, up from a 5.9% increase last month. Investing.com had forecast an increase of 3.2%. The index is at its all-time high.

Over this time frame, the US population has grown by 16.3%. For a better look at the underlying trend, here is an overlay with the nominal index and the population-adjusted variant. The focus is pending home sales growth since 2001.

The index for the most recent month is currently at its all-time high. The population-adjusted index is 6% off its 2005 high.

Pending versus Existing Home Sales

The NAR explains that "because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing Home Sales by a month or two." Here is a growth overlay of the two series. The general correlation, as expected, is close. And a close look at the numbers supports the NAR's assessment that their pending sales series is a leading index.