The National Association of Realtors® (NAR) pending home sales index rose more than expected in May, coming in at 72.6. This marks a 1.8% increase from April, higher than the anticipated 0.2% rise, and a 1.1% increase from one year ago.
"Consistent job gains and rising wages are modestly helping the housing market," said NAR Chief Economist Lawrence Yun. "Hourly wages are increasing faster than home prices. However, mortgage rate fluctuations are the primary driver of homebuying decisions and impact housing affordability more than wage gains."
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.
Over this time frame, the US population has grown by 20.4%. 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.
The above chart shows the percent off turn-of-the-century values. The index for the most recent month is currently 43% below its all-time high from August 2020. The population-adjusted index is 51% off its high from April 2005.
