It is a great time to be selling a home… and also for buying a home as mortgage rates are so low.
NAR: Aug. Pending Sales Top Pre-Pandemic Levels
The pending index hit a record high in Aug., with the number of sales under contract rising for the past four months in a row. NAR Economist Yun says he expected market stability during the shutdowns, but he’s “surprised to see the industry bounce back so strongly and so quickly.”
WASHINGTON – August pending home sales continued to move upward, marking four uninterrupted months of positive contract activity, according to the National Association of Realtors® (NAR). Each of the four major U.S. regions included in the report had both month-over-month and year-over-year increases in pending home sales transactions.
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – rose 8.8% to 132.8 – a record high – in August.
Year-over-year, contract signings rose 24.2%. An index of 100 is equal to the level of contract activity in 2001.
“Tremendously low mortgage rates – below 3% – have again helped pending home sales climb in August,” says Lawrence Yun, NAR’s chief economist. “Additionally, the Fed intends to hold short-term fed funds rates near 0% for the foreseeable future, which should, in the absence of inflationary pressure, keep mortgage rates low, and that will undoubtedly aid homebuyers continuing to enter the marketplace.
“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.”
Yun offers one note of caution: While pending contracts hit at an all-time high, that won’t necessarily translate into a record number of home sales because not all contracts lead to closings and sample sizes can vary. Yun says that pending home sales are outperforming many pre-pandemic averages, but without matching supply coming into the market, the recovery won’t be sustainable.
“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.”
In the four U.S. regions the index tracked, the Northeast PHSI grew 4.3% to 117.1 in August – a 26.0% jump from a year ago. In the Midwest, the index rose 8.6% to 124.5 last month, up 25.0% year-to-year.
Pending home sales in the South increased 8.6% to an index of 154.2 in August, up 23.6% from August 2019. The index in the West rose 13.1% to 120.3 – a 23.6% increase year-to-year.
By Kerry Smith
© 2020 Florida Realtors®