Like all other housing economic indicators, home purchase contract signings jumped 5.9% in July, according to the National Association of Realtors’ (NAR) Pending Home Sales Index (PHSI).
This marks the third consecutive month of growth, and all regions saw rising pending home sales during this time in annual and monthly improvements. Comparing the data to this time last year, contract signings are up 15.5%.
The index is used by the industry as an early indicator of upcoming closings. What do consumers do with this data? Typically not much.
But with all of the positive headlines, homebuyer Alexei F. in Austin, TX tells us that his family is inspired to begin house shopping a year earlier than previously planned.
“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” said NAR’s Chief Economist, Dr. Lawrence Yun. “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”
The global pandemic restricted the spring buying season, but NAR points out that most states are at least partially reopened, freeing up the pent-up demand.
Dr. Yun said in a statement that there are “no indications that contract activity will wane in the immediate future, particularly in the suburbs.”
Further, he forecasts that existing home sales (closings) will jump to 5.8 million in the second half of this year, creating a rebound and a small (1.1%) gain over 2019. In 2021, he anticipates that with a continuing low interest rate environment, and an economy he expects to expand by 4%, sales could reach 5.86 million.
“Anecdotally, Realtors are telling me there is no shortage of clients or home seekers, but that scarce inventory remains a problem,” Dr. Yun said.
“If 20% more homes were on the market, we would have 20% more sales, because demand is that high,” Dr. Yun observed, adding that he expects housing starts to average at 1.35 million in 2020 and to pick up in 2021, to 1.43 million.
July saw small to large surges regionally, and all have substantial growth compared to July of 2019:
- The Northeast PHSI grew 25.2% to 112.3 in July, a 20.6% jump from a year ago.
- In the Midwest, the index rose 3.3% to 114.6 last month, up 15.4% from July 2019.
- Pending home sales in the South increased 0.9% to an index of 142.0 in July, up 14.9% from July 2019.
- The index in the West rose 6.8% in July to 106.4, up 13.2% from a year ago.