Pending Home Sales Expand In November

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

“Despite the insufficient level of inventory, pending home contracts still increased in November,” said Lawrence Yun, NAR’s chief economist, noting that housing inventory has been in decline for six straight months dating back to June 2019. “The favorable conditions are expected throughout 2020 as well, but supply is not yet meeting the healthy demand.” (more here)

The chart below gives us a snapshot of the index since 2001. The MoM came in at 1.2%, up from a 1.3% decrease last month. Investing.com had forecast an increase of 1.2%.

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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.

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The index for the most recent month is 15% below its all-time high in 2005. The population-adjusted index is 24% 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.

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