The National Association of Realtors released the August data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales sagged for the third straight month in August."

WASHINGTON (September 28, 2022) – Pending home sales sagged for the third straight month in August, according to the National Association of REALTORS^®. Three out of four major regions experienced month-over-month decreases in transactions, however, the West saw a modest gain. Year-over-year, all four regions posted double-digit declines.

The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, fell 2.0% to 88.4 in August. Year-over-year, pending transactions dwindled by 24.2%. An index of 100 is equal to the level of contract activity in 2001.

"The direction of mortgage rates – upward or downward – is the prime mover for home buying, and decade-high rates have deeply cut into contract signings," said NAR Chief Economist Lawrence Yun. "If mortgage rates moderate and the economy continues adding jobs, then home buying should also stabilize." (more here)

The chart below gives us a snapshot of the index since 2001. The MoM came in at -2.0%, down from a 0.6% decrease last month. Investing.com had forecast a decrease of 1.4%.

Over this time frame, the US population has grown by 17.4%. 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 currently 33% below its all-time high. The population-adjusted index is 38% 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.

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