WASHINGTON (July 31, 2024) Pending home sales in June increased 4.8%, according to the National Association of Realtors. The data showed that all four regions in the United States saw monthly gains in transactions. However, year-over-year, there were declines in the Northeast, Midwest and South, while sales increased in the West.
The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, rose to 74.3 in June. But on a year-over-year basis, pending transactions fell 2.6%. The index is on par with activity levels in 2001.
Commenting on the data, Lawrence Yun, chief economist at the National Association of Realtors, said: “The increase in housing inventory is starting to lead to an increase in contract signings.” Multiple offers are becoming less common, giving buyers a more favorable position.”
This data is released about a week after existing home sales, but it is more forward-looking since the contract is signed several weeks before a home is counted as sold;
Why Dealers Care: It is a leading indicator of economic health because the sale of a home creates a ripple effect. For example, renovations are made by the new owners, the mortgage is sold by the financing bank, and brokers are paid to execute the transaction.
Pending Home Sales Breakdown by Region: Northeast: The Northeast’s Pending Home Sales Index (PHSI) rose 3.0% from the previous month to 65.5. However, the index was down slightly by 0.3% from June of last year.
Midwest: The Midwest’s PHSI increased 4.7% in June to 73.7. Despite the monthly increase, the index was down 4.2% year-over-year from the same month last year.
South: The South’s PHSI increased by 6.3% to 89.3 in June, but despite the monthly increase, the index was down 3.9% from June 2023.
More Inventory Flowing into the Housing Market
“We expect more inventory to flow into the housing market in the coming months, before the normal seasonal decline during the winter,” added Lawrence Yun, chief economist at the National Association of Realtors. “The slight increase in contract signings in the Northeast is due to the continued housing shortage in that region, leading to stronger gains in home prices. Now is a good time to list properties.”
Pending Home Sales Index and Definition of the Index: The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is classified as “pending” when a contract has been signed but the transaction has not yet closed. A sale is typically closed within a month or two of signing a contract.
Importance of the Index: Pending contracts are good early indicators of future home sales, providing a glimpse into market activity before sales close. However, the time between signing a contract and closing a sale can vary. Several factors can affect the length of this period, such as:
Financing issues: Difficulty for the buyer to obtain mortgage financing.
Inspection issues: Problems with inspecting the home. Also, appraisal issues: Challenges in assessing the value of the home.
Index bases and data sample: The index is based on a sample covering approximately 40% of the monthly Multiple Listing Services data. The development of the index model has shown that the monthly level of contract activity is a good reflection of the level of existing home sales that close in the following two months.
Index reference base: The 100-value index refers to the average level of contract activity during 2001, which was the first year examined.
About the National Association of Realtors
The National Association of Realtors (NAR) is the largest trade association in the United States, representing approximately 1.5 million members involved in all aspects of the residential and commercial real estate industry. The association was founded to promote the interests of real estate professionals and provide the resources necessary to support them in their work.
REALTOR BRAND DEFINITION The REALTOR brand refers to real estate professionals who are members of the National Association of Realtors. The use of this term is a registered collective membership mark that identifies individuals who adhere to the strict code of ethics established by the association. These codes are intended to ensure the provision of high-quality services and promote confidence in the real estate market.
The role of the association: The National Association of Realtors plays a pivotal role in the real estate industry by:
Providing education and training: The association provides professional training and education programs to help members improve their skills and knowledge in the field.
Policy support: The association promotes policies and legislation that support the interests of members and promote stability in the real estate market.
Providing tools and resources: The association provides a range of tools and resources to help members perform their duties effectively and efficiently. With its efforts and contributions, the National Association of Realtors remains a key player in the development and promotion of the real estate sector in the United States.
Importance of Data: Pending home sales data is an important forward-looking indicator of the economic health of the housing market, as transactions impact many economic sectors such as home renovations and mortgage financing.
Inventory Flow: The flow of more inventory into the housing market can affect future trends in the market.
