Pending Home Sales Recover in August

This morning the National Association of Realtors released the August data for their Pending Home Sales Index. Here is an excerpt from the latest press release:

WASHINGTON (September 29, 2021) – Pending home sales rebounded in August, recording significant gains after two prior months of declines, according to the National Association of Realtors®. Each of the four major U.S. regions mounted month-over-month growth in contract activity. However, those same territories reported decreases in transactions year-over-year, with the Northeast being hit hardest, enduring a double-digit drop.

The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, increased 8.1% to 119.5 in August. Year-over-year, signings dipped 8.3%. An index of 100 is equal to the level of contract activity in 2001.

"Rising inventory and moderating price conditions are bringing buyers back to the market," said Lawrence Yun, NAR's chief economist. "Affordability, however, remains challenging as home price gains are roughly three times wage growth." (more here)

The chart below gives us a snapshot of the index since 2001. The MoM came in at 8.1%, up from a 2.0% decrease last month. Investing.com had forecast an increase of 1.4%.

Pending Home Sales

Over this time frame, the US population has grown by 16.7%. 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.

Pending Home Sales Growth

The index for the most recent month is currently 8% below its all-time high. The population-adjusted index is 16% 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.