Pending home sales in July achieved another month of positive contract activity, marking three consecutive months of growth, according to the National Association of Realtors®. Each of the four major regions saw gains in both month-over-month and year-over-year pending home sales transactions.
The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, rose 5.9% to 122.1 in July. Year-over-year, contract signings rose 15.5%. An index of 100 is equal to the level of contract activity in 2001.
“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” said Lawrence Yun, NAR’s chief economist. “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”
Prospective buyers missed most of the spring buying season due to pandemic-induced lockdown measures. With nearly all states at least partially reopened, the market is experiencing robust activity from the pent-up demand. According to Yun, there are no indications that contract activity will wane in the immediate future, particularly in the suburbs.
Yun forecasts existing-home sales to ramp up to 5.8 million in the second half. That expected rebound would bring the full-year level of existing-home sales to 5.4 million, a 1.1% gain compared to 2019. Yun projects existing-home sales to reach 5.86 million in 2021, supported by an economy that he expects to expand by 4% and a low-interest-rate environment, with the 30-year mortgage rate average of 3.2%.
“Anecdotally, Realtors® are telling me there is no shortage of clients or home seekers, but that scarce inventory remains a problem,” Yun said. “If 20% more homes were on the market, we would have 20% more sales, because demand is that high.” He added that he expects housing starts to average at 1.35 million in 2020 and to pick up in 2021, to 1.43 million.
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