Pending homes sales index has risen

November 1, 2018 12:21 pm

The pending homes sales index has risen in September in the United States. That is according to new figures from the National Association of Realtors (NAR).

Pending homes sales index has risen

The Pending Home Sales Index is a forward-looking indicator based on contract signings. The pending homes sales index has risen 0.5% to 104.6 in September from 104.1 in August.

But year-over-year, contract signings dropped 1%, the ninth straight month of annual decreases.

NAR chief economist, Lawrence Yun, says despite the year-over-year declines, the latest monthly increase is a good, stabilizing trend. “This shows that buyers are out there on the sidelines, waiting to jump in once more inventory becomes available and the price is right.”

The lack of inventory of moderately priced homes and affordability issues are restraining the housing market. However, when viewed through the lens of the last few decades, the current affordability climate is still favorable.

“When compared to the year 2000, when the housing market was considered very healthy and home sales figures were roughly equivalent, the affordability conditions were much lower compared to now. So even though affordability has been falling recently, the demand for housing should remain steady.”

While the economy is thriving, it has yet to have a substantial impact on the real estate market. However, Mr Yun believes that may be about to change. “The general condition of the economy is excellent, it simply has not lifted home sales this year. Home prices are still rising, so people who are purchasing are still seeing wealth gains.”

Homeownership ‘still path to long-term financial health’

With rising house prices, more people are considering the benefits of renting, however, Mr Yun believes that homeownership is still the path to long-term financial health. “Excluding periods of subprime lending, homeownership has consistently led to wealth gains. If people are willing to purchase a home within their budget, they will likely continue to accumulate equity.”

Pending home sales in the South are now at index of 119.6 in September, 3.3% higher than a year ago.

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes.

The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. The level of monthly sales-contract activity often parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001. The volume of existing-home sales in 2001 fell within 5.0 to 5.5 million, which is considered normal for the current U.S. population.