Pending Home Sales Fell in June

The National Association of Realtors released the June data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales decreased in June, following a slight increase in May."

WASHINGTON (July 27, 2022) – Pending home sales decreased in June, following a slight increase in May, according to the National Association of REALTORS®. All four major regions posted month-over-month and year-over-year pullbacks, the largest of which occurred in the West.

The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, dipped 8.6% to 91.0 in June. Year-over-year, transactions shrank 20.0%. An index of 100 is equal to the level of contract activity in 2001.

"Contract signings to buy a home will keep tumbling down as long as mortgage rates keep climbing, as has happened this year to date," said NAR Chief Economist Lawrence Yun. "There are indications that mortgage rates may be topping or very close to a cyclical high in July. If so, pending contracts should also begin to stabilize." (more here)

The chart below gives us a snapshot of the index since 2001. The MoM came in at -8.6%, down from a 0.4% increase last month. Investing.com had forecast a decrease of 1.5%.

Pending Home Sales

Over this time frame, the US population has grown by 17.3%. 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 32% below its all-time high. The population-adjusted index is 36% 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.