Pending Home Sales Rise 5.9% in July

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

“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” said 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. With nearly all states at least partially reopened, the market is experiencing robust activity from the pent-up demand. According to Yun, there are no indications that 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. 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 to 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 average of 3.2%. (more here)

The chart below gives us a snapshot of the index since 2001. The MoM came in at 5.9%, down from a 15.8% increase last month. Investing.com had forecast an increase of 3.0%.

Over this time frame, the US population has grown by 20.3%. 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 4% below its all-time high in 2005. The population-adjusted index is 14% 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.