November 30, 2020
Pending home sales fell 1.1% in October to 128.9 after declining 2.2% in September. Following the March/April recession, home sales have surged.
Lawrence Yun, the Chief Economist for the National Association of Realtors said that “Pending home transactions saw a small drop off from the prior month but still easily outperformed last year’s numbers for October, The housing market is still hot, but we may be starting to see rising home prices hurting affordability.” He added that, “Both the inventory of homes for sale and mortgage rates are now at historic lows. The combination of these factors – scarce housing and low rates – plus very strong demand has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers, who don’t have the luxury of using housing equity from a sale to use as a down payment. Work-from-home flexibility has also increased the demand for both primary and secondary homes.”
This series on pending home sales is collected by the National Association of Realtors and represents contracts signed, but not yet closed, on existing home sales. Thus, it is both a leading indicator of existing home sales and housing market activity in general. Not all these contracts go to completion. The buyer may not qualify for a mortgage, the house may not appraise at a sufficiently high value, or the house may fail the buyer’s inspection. But the series is clearly indicative of changes in housing market activity.