Pending Home Sales Jump in December

The National Association of Realtors® (NAR) released the latest monthly data for its pending home sales index. The index jumped 8.3% in December to 77.3, its highest reading in five months. Pending home sales were expected to increase 1.5% last month. Compared to one year ago, pending home sales are up 1.3%.

"The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices," said Lawrence Yun, NAR chief economist. "Job additions and income growth will further help with housing affordability, but increased supply will be essential to satisfying all potential demand."

"Home sales are projected to rise significantly in each of the next two years as the market steadily returns to normal sales activity," added Yun.

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Pending Home Sales Background

The pending home sales index (PHSI) was created by the National Association of Relators to track home sales where the contract is signed, but the transaction has not yet closed. An index of 100 is equal to the level of contract activity in 2001. The PHSI is a leading economic indicator of future existing home sales.

The chart below gives us a snapshot of the index since 2001, the first year data was analyzed. Pending Home Sales Index

Over this time frame, the US population has grown by 18.4%. 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 above chart shows the percent off turn-of-the-century values. The index for the most recent month is currently 40% below its all-time high from August 2020. The population-adjusted index is 46% off its high from April 2005.