Pending Home Sales Jump in October

The National Association of Realtors released the October data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales increased in October, rebounding after a decline the month prior."

WASHINGTON (November 29, 2021) – Pending home sales increased in October, rebounding after a decline the month prior, according to the National Association of Realtors®. Contract activity rose month-over-month in each of the four major U.S. regions. On a year-over-year basis, however, transactions were split, as two regions reported drops and two others posted gains.

The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, rose 7.5% to 125.2 in October. Year-over-year, signings fell 1.4%. An index of 100 is equal to the level of contract activity in 2001.

"Motivated by fast-rising rents and the anticipated increase in mortgage rates, consumers that are on strong financial footing are signing contracts to purchase a home sooner rather than later," said Lawrence Yun, NAR's chief economist. "This solid buying is a testament to demand still being relatively high, as it is occurring during a time when inventory is still markedly low." (more here)

The chart below gives us a snapshot of the index since 2001. The MoM came in at 7.5%, up from a 2.4% decrease last month. Investing.com had forecast an increase of 0.9%.

Pending Home Sales

Over this time frame, the US population has grown by 16.8%. For a better look at the underlying trend, here is an overlay with the nominal index and the population-adjusted variant. The focus is pending home sales growth since 2001.

Pending Home Sales Growth

The index for the most recent month is currently 4% below its all-time high. The population-adjusted index is 12% off its high.

Pending versus Existing Home Sales

The NAR explains that "because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing-Home Sales by a month or two." Here is a growth overlay of the two series. The general correlation, as expected, is close. And a close look at the numbers supports the NAR's assessment that their pending sales series is a leading index.