The Pending Home Sales Index hits a record high, exceeding pre-pandemic levels
Marking the fourth month of positive contract activity, August’s Pending Home Sales Index (PHSI) soared to a record high—increasing 8.8 percent to 132.8—a 24.2 percent increase in year-over-year contract signings. For context, an index of 100 is equal to the level of contract activity in 2001.
“Tremendously low mortgage rates—below 3 percent—have again helped pending home sales climb in August,” says Lawrence Yun, National Association of Realtors® (NAR’s) chief economist. “Additionally, the Fed intends to hold short-term fed funds rates near 0 percent for the foreseeable future, which should, in the absence of inflationary pressure, keep mortgage rates low, and that will undoubtably aid homebuyers continuing to enter the marketplace.”
From the onset of the pandemic, Yun has remained confident in the housing industry, though he notes the pace of its recovery is even better than expected. “While I did very much expect the housing sector to be stable during the pandemic-induced economic shutdowns, I am pleasantly surprised to see the industry bounce back so strongly and so quickly.”
Lower rates met with higher home prices
Yun points out that while pending contracts are at an all-time high, it won’t necessarily yield a record number of home sales, as a contract doesn’t always lead to a closing. And while pending home sales are currently outpacing last year’s numbers, they’ll need adequate supply in order to maintain that pace.
“Home prices are heating up fast,” he says. “The low mortgage rates are allowing buyers to secure cheaper mortgages, but many may find it harder to make the required down payment.”
According to Realtor.com®’s Housing Market Recovery Index, the metro areas with the greatest recoveries, as of September, include:
- Seattle-Tacoma-Bellevue, Wash.
- Las Vegas-Henderson-Paradise, Nev.
- Boston-Cambridge-Newton, Mass.-N.H
- Denver-Aurora-Lakewood, Colo.
- Philadelphia-Camden-Wilmington, Pa.-N.J-Del.-Md.
Growth across the board
All four major regions reported both month-over-month and year-over-year growth in contract-activity.
August Pending Home Sales Index (PHSI):
- Northeast: Up 4.3% to 117.1—26% higher than last year
- Midwest: Up 8.6% to 124.5—25% higher than last year
- South: Up 8.6% to 154.2—23.6% higher than last year
- West: Up 13.1% to 120.3—23.6% higher than last year