Pending home sales fell 5.5% in July, the National Association of Realtors reported. All four regions of the U.S. saw monthly transactions decline. While sales in the Northeast rose year-over-year, other regions such as the Midwest, South and West saw notable declines.
The Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts, fell to 70.2 in July, its lowest level since it began tracking in 2001. On a year-over-year basis, pending transactions fell 8.5%. An index of 100 indicates the level of contract activity in 2001.
On a monthly basis, all four regions of the U.S. saw a decline in signed contracts. Compared to a year ago, sales increased in the Northeast, while they declined in the Midwest, South and West.
“The market did not see a mid-summer recovery,” said Lawrence Yun, chief economist at the National Association of Realtors. “Positive factors like job growth and high inventory were unable to overcome affordability challenges and some anticipation surrounding the upcoming U.S. presidential election.”
The breakdown of regional statistics for pending home sales shows that the Northeast’s PHSI fell 1.4% from last month to 64.6 but was up 2.4% from July 2023. In the Midwest, the index fell 7.8% to 67.8, down 11.4% year-over-year. The South’s index fell 6.5% to 83.5 in July, down 11.5% from a year earlier.
“The New England region has performed relatively well compared to other regions in terms of home sales and prices in recent months,” Yun added. “Currently low mortgage rates are sure to attract buyers to the market.”
Note: Existing home sales data for August will be released on September 19, while the next pending home sales index will be released on September 26.
Home Sales Index: Housing Market Indications and Trends
The USD Pending Home Sales m/m (month-over-month) indicator measures the change in the number of homes under contract to be sold but still awaiting the closing transaction compared to the previous month in the United States. Here are some key points about this economic indicator:
Definition: Home Sales data reflects the number of homes that have a signed sales contract but have not yet closed. It serves as a leading indicator of future Existing Home Sales, as a signed contract typically precedes a completed sale by a few weeks to a couple of months.
Significance: Pending Home Sales provide insights into the future direction of the housing market. An increase in pending sales suggests potential growth in existing home sales in the coming months, while a decline may indicate a slowdown in the housing market.
Market Impact: This indicator can influence market sentiment and expectations regarding the health of the housing sector. Stronger-than-expected data can positively impact real estate-related stocks, construction industries, and mortgage lenders, while weaker-than-expected data may have a negative effect.
Economic Context: The housing market is closely tied to consumer confidence, employment levels, mortgage rates, and overall economic conditions. Changes in Pending Home Sales can reflect shifts in these broader economic factors.
Seasonal Factors: Like other housing market indicators, Pending Home Sales can be influenced by seasonal trends. For example, spring and summer months typically see higher home buying activity, while winter months may experience a slowdown.
Policy Implications: Policymakers and analysts often use Pending Home Sales data to assess the effectiveness of housing policies and to gauge the overall health of the real estate market
In summary, the USD Home Sales m/m indicator is an important gauge of future home sales activity and provides valuable information about the health
Comparing Home Sales to Other Housing Market Indicators
Pending home sales data is a key indicator of the housing market landscape. Here’s how it compares to other housing market indicators:
Existing Home Sales: Existing home sales data reflects the actual number of completed transactions for previously owned homes. home sales, on the other hand, represent contracts that have been signed but not yet closed. home sales can be an indicator of future existing home sales activity.
New Home Sales: New home sales data tracks the number of newly built homes sold during a given period. home sales can provide insights into future demand for new housing, as high sales may indicate potential growth in new home sales.
Housing Starts: Housing starts data measures the number of new residential construction projects that have begun during a given period. home sales can provide indicators of future demand for housing starts, as a strong pending sales report may indicate increased demand for new construction.
Home Price Indices: Home price indices, such as the Case-Shiller Index, track changes in home prices over time. home sales data, while not directly related to home prices, can influence pricing trends. Higher pending sales can lead to increased competition and potential price increases in the future.
Mortgage Applications: Mortgage application data provides insights into current mortgage demand for home purchases and refinancing. home sales numbers can influence mortgage application trends, as a strong pending sales report may lead to an increase in mortgage applications.
By looking at how pending home sales data compares to and interacts with other housing market indicators, analysts, policymakers, and investors can gain a more comprehensive understanding of the dynamics within the real estate market and make informed decisions based on a broader perspective of the housing sector.
