Pent up demand brings pending home sales up 5.9 percent in July
Marking the third consecutive month of growth, July’s Pending Home Sales Index (PHSI) climbed 5.9 percent to 122.1, increasing year-over-year contract signings by 15.5 percent. For context, and index of 100 is equal to the level of contract activity in 2001.
“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” says National Association of Realtors® (NAR’s) chief economist, Lawrence Yun. “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”
While prospective buyers missed the majority of the spring buying season because of pandemic-induced lockdown measures, the market is now seeing the results of that pent-up demand, with activity continuing to increase.
Positive predictions for the future
Yun predicts contract activity will remain steady for the immediate future—pointing particularly to activity in the suburbs—predicting existing-home sales to increase to 5.8 million in the second half of the year. If this prediction holds true, the full-year level of existing home sales would reach 5.4 million, a 1.1 percent increase compared to 2019.
In 2021, Yun expects existing-home sales to reach 5.86 million, based on his prediction of a 4 percent economic expansion and the continuation of a low-interest rate environment, with a 30-year mortgage rate average of 3.2 percent.
Inventory struggles to keep up with demand
“Anecdotally, Realtors® are telling me there is no shortage of clients or home seekers, but that scarce inventory remains a problem,” says Yun. “If 20 percent more homes were on the market, we would have 20 percent more sales, because demand is that high.” Yun notes he expects housing starts to average at 1.35 million in 2020, and then pick up to 1.43 million in 2021.
Growth across the regions
All four major regions experienced both month-over-month and year-over-year growth in pending home sales transactions.
July’s Pending Home Sales Index:
- Northeast: up 25.2% to 112.3—20.6% higher than last year
- Midwest: up 3.3% to 114.6—15.4% higher than last year
- South: up 0.9% to 142.0—14.9% higher than last year
- West: up to 6.8% to 106.4—13.2% higher