Pending Home Sales Hit All-time High in August, Spikes 8.8 Percent
Contract signings exceed pre-pandemic levels
According to the National Association of Realtors, pending U.S. home sales in August 2020 continued to move upward, marking four uninterrupted months of positive contract activity. Each of the four major regions experienced growth in month-over-month and year-over-year 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," said 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 notes that while pending contracts are at an all-time high, that will not necessarily translate to a record number of home sales because not all contracts lead to closings and due to sampling size variations. He also points out that pending home sales are outperforming many pre-pandemic averages, but says that without matching supply, the recovery will not be sustainable.
"Home prices are heating up fast," he said. "The low mortgage rates are allowing buyers to secure cheaper mortgages, but many may find it harder to make the required down payment."
Realtor.com's Housing Market Recovery Index, which reveals metro areas where the market has recovered or even exceeded its previous January levels, showed the greatest recoveries as of September 19 were in Seattle-Tacoma-Bellevue, Wash.; Las Vegas-Henderson-Paradise, Nev.; Boston-Cambridge-Newton, Mass.-N.H.; Denver-Aurora-Lakewood, Colo.; and Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.August Pending Home Sales Regional Breakdown
All four regional indices recorded increases in contract activity on a month-over-month basis in August.
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% from August 2019.
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% in August to 120.3, up 23.6% from a year ago.