Pending Home Sales Skid In December
Wednesday morning the National Association of Realtors released the September data for their Pending Home Sales Index. Here is an excerpt from the latest press release:
“Mortgage rates are expected to hold under 4% for most of 2020, while net job creation will likely exceed two million,” said Lawrence Yun, NAR’s chief economist. While he noted that these factors are promising for the housing market, Yun cautioned that low inventory remains a significant longer-term concern.
“Due to the shortage of affordable homes, home sales growth will only rise by around 3%,” Yun predicted. “Still, national median home price growth is in no danger of falling due to inventory shortages and will rise by 4%. The new home construction market also looks brighter, with housing starts and new home sales set to rise 6% and 10%, respectively.” (more here)
The chart below gives us a snapshot of the index since 2001. The MoM came in at -4.9%, down from a 1.2% increase last month. Investing.com had forecast an increase of 0.5%.
Over this time frame, the US population has grown by 16.4%. 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 19% below its all-time high in 2005. The population-adjusted index is 27% 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.