Pending Home Sales Inch Up In November

This morning the National Association of Realtors released the November data for their Pending Home Sales Index. Here is an excerpt from the latest press release:

Lawrence Yun, NAR chief economist, says contract signings mustered a small gain in November and were up annually for the first time since June. “The housing market is closing the year on a stronger note than earlier this summer, backed by solid job creation and an economy that has kicked into a higher gear,” he said. “However, new buyers coming into the market are finding out quickly that their options are limited and competition is robust. Realtors® say many would-be buyers from earlier this year, stifled by tight supply and higher prices, are still trying to buy a home.”

One of the biggest questions heading into 2018, according to Yun, is if the depressed levels of available supply can improve enough to slow price growth and make buying a home more affordable. While last month’s significant boost in existing sales was noteworthy, it did come with some concerns. Sales prices were up 5.8 percent – more than double wage growth – and the 3.4-month supply of homes on the market was the lowest since NAR began tracking in 1999. (more here).

The chart below gives us a snapshot of the index since 2001. The MoM came in at 0.2%, down from the 3.5% increase last month. Investing.com had a forecast of -0.4%.

Over this time frame, the US population has grown by 15.0%. 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 index for the most recent month is 14% below its all-time high in 2005. The population-adjusted index is 22% off its 2005 high.

Pending versus Existing Home Sales

The NAR explains that “because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing Home Sales by a month or two.” Here is a growth overlay of the two series. The general correlation, as expected, is close. And a close look at the numbers supports the NAR’s assessment that their pending sales series is a leading index.