A dip from last month, but sales remain 20.2% higher than last year
Though year-over-year contract signings were up 20.2%, the Pending Home Sales Index (PHSI) fell 1.1% to 128.9 in October. For context, an index of 100 is equal to 2001’s level of contract activity.
“Pending home transactions saw a small drop off from the prior month but still easily outperformed last year’s numbers for October,” says Lawrence Yun, National Association of Realtors® (NAR’s) chief economist. “The housing market is still hot, but we may be starting to see rising home prices hurting affordability.”
Mortgage rates and inventory at historic lows
As rates remain low and demand continues to grow, inventory levels are shrinking, and home prices are soaring. “The combination of these factors—scarce housing and low rates—plus very strong demand has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers, who don’t have the luxury of using housing equity from a sale to use as a down payment,” says Yun. “Work-from-home flexibility has also increased the demand for both primary and secondary homes.”
The hot spots
Realtor.com®’s Housing Market Recovery Index showed the following metro areas had recovered or exceeded January 2020 levels:
- Las Vegas-Henderson-Paradise, Nev.
- San Francisco, Calif.
- Seattle-Tacoma-Bellevue, Wash.
- San Jose-Sunnyvale-Santa Clara, Calif.
- Los Angeles-Long Beach-Anaheim, Calif.
Across the regions
While only the South saw growth from a month-to-month measurement, all four major regions recorded double-digit year-over-year increases.
October Pending Home Sales Index (PHSI):
- Northeast: Down 5.9% to 112.3—18.5% higher than last year
- Midwest: Down 0.7% to 119.6—19.6% higher than last year
- South: Up 0.1% to 151.1—21.0% higher than last year
- West: No change at 116.8—20.8% higher than last year