WASHINGTON (August 30, 2023) – Pending home sales increased 0.9% in July, increasing for the second consecutive month, according to the National Association of REALTORS®. The Northeast and Midwest posted monthly losses, while sales in the South and West grew. All four U.S. regions experienced year-over-year declines in transactions.
He Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – rose 0.9% to 77.6 in July. Year over year, pending transactions fell 14.0%. An index of 100 is equivalent to the level of contractual activity in 2001.
“The small increase in contract signings shows the potential for larger increases in light of the fact that many people have lost multiple home purchase offers,” said NAR Chief Economist Lawrence Yun. “Jobs are being created, thereby expanding the pool of potential homebuyers. However, rising mortgage rates and limited inventory have temporarily hindered the ability to purchase for many.”
Regional Breakdown of Pending Home Sales
The Northeast PHSI contracted 5.8% from last month to 63.2, a 20.2% decline from July 2022. The Midwest index fell 0.4% to 77.5 in July, 16.0% less than a year ago.
The South PHSI increased 2.0% to 95.3 in July, decreasing 10.9% from a year ago. The Western index improved 6.2% in July to 61.3, falling 12.8% from July 2022.
“Interestingly, the western region saw a significant drop in prices last year and as a result, buyers are quickly returning,” Yun added.
About the National Association of REALTORS®
The National Association of REALTORS® is the largest trade association in the United States, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Ethical code.
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*The Pending Home Sales Index is a leading indicator for the real estate sector, based on pending sales of existing homes. A sale is considered pending when the contract is signed but the transaction does not close, although the sale usually ends within one or two months after signing.
Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale may be due to issues such as buyer difficulties obtaining mortgage financing, home inspection issues, or appraisal issues.
The index is based on a sample that covers approximately 40% of data from multiple listing services each month. In developing the model for the index, it was shown that the level of monthly sales contract activity parallels the level of closed sales of existing homes in the following two months.
An index of 100 is equivalent to the average level of contractual activity during 2001, which was the first year examined. Coincidentally, the sales volume of existing homes in 2001 was within the range of 5.0 to 5.5 million, which is considered normal for today’s US population.
NOTE: August existing home sales will be reported on September 21. The next pending home sales index will be September 28. All posting times are 10am Eastern Time. Watch the NAR Statistical Press Release Calendar.