This morning the National Association of Realtors released the August data for their Pending Home Sales Index. Here is an excerpt from the latest press release:
Lawrence Yun, NAR chief economist, says that low inventory continues to contribute to the housing market slowdown. “Pending home sales continued a slow drip downward, with the fourth month over month decline in the past five months,” he said.
“Contract signings also fell backward again last month, as declines in the West negatively impacted overall activity,” he said. “The greatest decline occurred in the West region where prices have shot up significantly, which clearly indicates that affordability is hindering buyers and those affordability issues come from lack of inventory, particularly in moderate price points.” (more here).
The chart below gives us a snapshot of the index since 2001. The MoM came in at -1.8%, down from a 0.8% decrease last month. Investing.com had a forecast of -0.2%.
Over this time frame, the US population has grown by 15.7%. 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 18% below its all-time high in 2005. The population-adjusted index is 26% 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.
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