All signs point up
The Pending Home Sales Index (PHSI), an indicator based on sales contract signings, is back up this year to its highest point since July. Usually, the PHSI sees a seasonal downswing after summer. At 110, this October’s PHSI is up .1 percent from September and up 1.8 percent from October 2015.
Buyer demand remains strong
More good news: the PHSI shows broad growth across the country, not just in the biggest cities. “Most of the country last month saw at least a small increase in contract signings and more notably, activity in all four major regions is up from a year ago,” reports Lawrence Yun, the chief economist for the National Association of Realtors. “Despite limited listings and steadfast price growth that’s now carried into the fall, buyer demand has remained strong because of the consistently reliable job creation in a majority of metro areas.”
Pending home sales are up in every quarter of the country.
In the Northeast and West, sales are up 3.9 and 2.5 percent since last year, respectively, coming in at 96.9 and 108.3. In the Midwest and the South, sales are up 1.2 and 0.8 percent, respectively, coming in at 106.3 and 120.1. Sales are slightly down in the South since last month, but the yearlong trend is the number that especially matters.
Sales aren’t the only thing on the up
After a consistent standstill below 4 percent, mortgage rates are finally rising. The combination of stable job growth and stuck mortgage rates could have easily facilitated the steady gains in housing sales and development in the last year and heading into October.
Yun adds, “Many of the successful shoppers in October likely had to move fast and outbid others for the few listings available in the affordable price range. Those obtaining a mortgage last month were likely the last group of buyers to lock in a rate near historically low levels now that rates have marched to around 4 percent since the election.”
But don’t let that dishearten you. Sales prices are also up, which translates to more wealth disbursed within each community. This October, 40 percent of home sales closed at or above list prices. For comparison, that number was only 33 percent a year ago.
With its steady rise, Yun predicts sales closing pace of 5.25 million this year—that is the highest number since 2006, which closed at a pace of 6.48 million. Keep your eyes up for the November numbers once the new mortgage rates kick in.