Pending Home Sales Dwindle In February

The National Association of Realtors released the February data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales slipped in February, marking four consecutive months of transaction decreases."

WASHINGTON (March 25, 2022) – Pending home sales slipped in February, marking four consecutive months of transaction decreases, according to the National Association of Realtors®. Three of the four major U.S. regions saw contract signings fall month-over-month, with the Northeast being the only area that reported an increase. All four regions registered a decline in year-over-year contract activity.

The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, waned 4.1% to 104.9 in February. Year-over-year, transactions dropped 5.4%. An index of 100 is equal to the level of contract activity in 2001.

"Pending transactions diminished in February mainly due to the low number of homes for sale," said Lawrence Yun, NAR's chief economist. "Buyer demand is still intense, but it's as simple as ‘one cannot buy what is not for sale."

The chart below gives us a snapshot of the index since 2001. The MoM came in at -4.2%, up from a 5.7% decrease last month. Investing.com had forecast an increase of 1.0%.

Over this time frame, the US population has grown by 17.2%. 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 21% below its all-time high. The population-adjusted index is 27% off its 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.