The National Association of Realtors (NAR) is reporting that pending home sales rebounded in August by 1.6% after a sluggish July. The Pending Home Sales Index (PHSI), which NAR says is a forward-looking indicator based on contract signings, increased to 107.3 in August, rising from 105.6 in July. All regions saw increases per the index according to the report.
A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. An index level of 100 is equivalent to a normal level according to the NAR. Lawrence Yun, chief economist for the NAR see the report as positive sign for the real estate industry. He states “It is very encouraging that buyers are responding to exceptionally low interest rates. The notable sales slump in the West region over recent years appears to be over. Rising demand will reaccelerate home price appreciation in the absence of more supply.”
As stated earlier all regions saw an increase in the PHSI with the highest increase being in the West growing at 3.1%. The Northeast, of importance to the New York City region rose 1.4% to 94.3. It is now 0.7% higher than a year ago. Pending home sales in the South increased 1.4% to an index of 124.4 in August, which is an increase of 1.8% year to year. The Midwest saw an increased in the index of 0.6% to 101.7 in August, which is 0.2% higher than August 2018.
With respect to the forecast of sales ahead Yun believes that we are in need of higher home construction activity. He states “With interest rates expected to remain low, home sales are forecasted to rise in the coming months and into 2020. Unfortunately, so far in 2019, new home construction is down 2.0%. The hope is that housing starts quickly move into higher gear to meet the higher demand. Moreover, broader economic growth will strengthen from increased housing activity.” The NAR is predicting “home sales to rise 0.6% in 2019 and another 3.4% in 2020. Housing starts are predicted to increase by 2.0% in 2019 and jump an additional 10.6% in 2020, which in turn raises GDP to growth at 2.0% in 2020.”
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