NAR: June’s Pending Home Sales Index Surges 16.6% Higher
WASHINGTON (July 29, 2020) – Pending home sales continued to increase in June for two consecutive months of increases in contract activity, according to the National Association of Realtors® (NAR). Each of the four major regions that make up the report saw growth in month-over-month pending home sales transactions, and pending sales in every area except the Northeast were higher in a year-to-year comparison.
The Pending Home Sales Index (PHSI), – a forward-looking indicator of home sales based on contract signings – rose 16.6% to 116.1 in June. Year-over-year, contract signings rose 6.3%. An index of 100 is the baseline – a number equal to the level of contract activity in 2001.
“It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” says Lawrence Yun, NAR’s chief economist. “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.”
In light of the apparent housing market turnaround, NAR raised its market forecast for 2020, with existing-home sales expected to decline by only 3% and sales ramping up to 5.6 million by the fourth quarter. New home sales are projected to rise 3%.
Yun expects even greater things in 2021. He predicts that GDP (gross domestic product) will grow 4% in 2021; and that, in turn, will push existing-home sales 7% higher and new-home sales 16% higher. He things home prices will also keep going up, but a predicted 2020 increase of 4% will likely be closer to 3% in 2021.
June pending home sales regional breakdown: For the second month in a row, all four index regions saw higher pending home sales. The Northeast PHSI grew 54.4% to 95.4, though it was the only region to see a year-to-year decline, dropping 0.9%. In the Midwest, the index rose 12.2% to 110.9 last month and 5.1% year-to-year.
Pending sales in the South increased 11.9% to 140.3 in June, up 10.3% year-to-year. In the West, the index surged 11.7% higher in June to 99.6, and it was up 4.7% year-to-year.
“The Northeast’s strong bounce-back comes after a lengthier lockdown, while the South has consistently outperformed the rest of the country,” Yun says. “These remarkable rebounds speak to exceptionally high buyer demand.”
As house hunters seek homes away from bigger cites – likely in an effort to avoid the coronavirus – properties that were once an afterthought for potential buyers are now growing in popularity, Yun says.
According to data from realtor.com, metros with suburbs that most recently saw the highest gains in hotness rankings include Columbia, S.C.; Little Rock, Ark.; Greensboro, N.C.; Tulsa, Okla.; and Cape Coral, Fla.
“While the outlook is promising, sharply rising lumber prices are concerning,” Yun says. “A reduction in tariffs – even if temporary – would help increase home building and thereby spur faster economic growth.”
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