Pending Home Sales Edged Up in May

The National Association of Realtors released the May data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales crept higher in May, ending a six-month streak of declines."

WASHINGTON (June 27, 2022) – Pending home sales crept higher in May, ending a six-month streak of declines, according to the National Association of Realtors®. Regionally, month-over-month results were mixed as the Northeast and South experienced increases while the Midwest and West posted decreases. Year-over-year contract activity slid in all four major regions.

The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, inched up 0.7% to 99.9 in May. Year-over-year, transactions dropped 13.6%. An index of 100 is equal to the level of contract activity in 2001.

"Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transition," said NAR Chief Economist Lawrence Yun. "Contract signings are down sizably from a year ago because of much higher mortgage rates." (more here)

The chart below gives us a snapshot of the index since 2001. The MoM came in at 0.7%, up from a 4.0% decrease last month. Investing.com had forecast a decrease of 3.7%.

Pending Home Sales

Over this time frame, the US population has grown by 17.2%. 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 25% below its all-time high. The population-adjusted index is 30% 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.