Pending Home Sales Subside In November

The National Association of Realtors released the October data for their Pending Home Sales Index. According to the National Association of Realtors®, "ending home sales slipped in November, receding slightly after a previous month of gains."

WASHINGTON (December 29, 2021) - Pending home sales slipped in November, receding slightly after a previous month of gains, according to the National Association of Realtors®. Each of the four major U.S. regions witnessed contract transactions decline month-over-month. Year-over-year activity mostly retreated too, as three regions reported drops and only the Midwest saw an increase.

The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, fell 2.2.% to 122.4 in November. Year-over-year, signings slid 2.7%. An index of 100 is equal to the level of contract activity in 2001.

"There was less pending home sales action this time around, which I would ascribe to low housing supply, but also to buyers being hesitant about home prices," said Lawrence Yun, NAR's chief economist. "While I expect neither a price reduction, nor another year of record-pace price gains, the market will see more inventory in 2022 and that will help some consumers with affordability." (more here)

The chart below gives us a snapshot of the index since 2001. The MoM came in at -2.2%, down from a 7.5% increase last month. Investing.com had forecast an increase of 0.5%.

Over this time frame, the US population has grown by 16.8%. 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 6% below its all-time high. The population-adjusted index is 14% off its high.

Pending Vs. 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.