Pending home sales slip but remain ahead of 2019

Pending home sales slipped slightly in October, the National Association of Realtors reported today.

The Pending Home Sales Index (PHSI) fell 1.1% to 128.9 in October, marking the second straight month of declines. The index is a forward-looking indicator of home sales based on contract signings. An index of 100 is equal to the level of contract activity in 2001.

Despite the decrease, year-over-year contract signings rose 20.2%, the NAR said.

“Pending home transactions saw a small drop off from the prior month but still easily outperformed last year’s numbers for October,” said Lawrence Yun, NAR’s chief economist. “The housing market is still hot, but we may be starting to see rising home prices hurting affordability.”

While mortgage rates remain at historic lows, housing inventory on the market is also at a historic low resulting in a hike in home prices.

“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,” said Yun. “Work-from-home flexibility has also increased the demand for both primary and secondary homes.”

Here’s how pending home sales for October break down by region:

• The Northeast PHSI slid 5.9% to 112.3 in October, a 18.5% increase from a year ago.
•  In the Midwest, the index fell 0.7% to 119.6 last month, up 19.6% from October 2019.
• Pending home sales in the South increased 0.1% to an index of 151.1 in October, up 21.0% from October 2019. 
• The index in the West remained the same in October, at 116.8, which is up 20.8% from a year ago.