June pending home sales see 16.6 percent increase
Marking the second consecutive month of increases in contract activity, the Pending Home Sales Index (PHSI) rose 16.6 percent to 116.1 in June. Year-over-year numbers increased as well, with contract signings up 6.3 percent. For context, an index of 100 is equal to 2001’s level of contract activity.
“It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” says Lawrence Yun, NAR’s chief economist. “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.”
Because of this market turnaround, NAR has raised its market forecast—predicting existing-home sales to decline by only 3 percent for all of 2020, with new home sales projected to increase 3 percent.
Yun foresees positive GDP growth of 4 percent in 2021 boosting existing home sales by 7 percent and new home sales by 16 percent. Mortgage rates are expected to remain close to 3 percent over the next 18 months, while home prices are projected to appreciate 4 percent in 2020, before decreasing to 3 percent as new supply reaches the market.
Growth across the regions
Each of the four major regions experienced month-over-month growth, with three of the regions increasing year-over-year numbers as well.
June pending home sales index:
- Northeast: up 54.4% to 95.4—0.9% lower than last year
- Midwest: up 12.2% to 110.9—5.1% higher than last year
- South: up 11.9% to an index of 140.3—10.3% higher than last year
- West: up 11.7% to 99.6—4.7% higher than last year
“The Northeast’s strong bounce back comes after a lengthier lockdown, while the South has consistently outperformed the rest of the country,” explains Yun. “These remarkable rebounds speak to exceptionally high buyer demand.”
Yun anticipates house hunters looking for homes away from bigger cities, noting that properties that were previously overlooked are now growing in popularity, as buyers attempt to avoid the coronavirus.
Data from realtor.com® highlights metros with suburbs that have seen some of the highest gains in rankings:
- Columbia, S.C.
- Little Rock, Ark.
- Greensboro, N.C.
- Tulsa, Okla.
- Cape Coral, Fla.
Yun is hopeful for continued growth but cautions that homebuilding needs to remain affordable.
“While the outlook is promising, sharply rising lumber prices are concerning,” says Yun. “A reduction in tariffs—even if temporary—would help increase home building and thereby spur faster economic growth.”