WASHINGTON — Pending home sales rose in September, according to the National Association of Realtors®. All four major regions experienced month-over-month gains in transactions. Year-over-year, the Northeast and West registered increases while sales remained steady in the Midwest and South.
The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – jumped 7.4% to 75.8 in September, the highest level since March (78.3). Year-over-year, pending transactions ascended 2.6%. An index of 100 is equal to the level of contract activity in 2001.
“Contract signings rose across all regions of the country as buyers took advantage of the combination of lower mortgage rates in late summer and more inventory choices,” said NAR Chief Economist Lawrence Yun. “Further gains are expected if the economy continues to add jobs, inventory levels grow, and mortgage rates hold steady.”
NAR economic and housing outlook
In the next two years, Yun foresees slower home price appreciation and corresponding increases in sales.
“After two years of sluggish home sales in 2023 and 2024, existing-home sales are forecasted to rise to 4.47 million in 2025 and more than 5 million in 2026,” Yun said. “During the next two years, expect a slower rate of growth in home prices that’s roughly in line with the consumer price index because of additional supply reaching the market.”
Yun predicts the median existing-home price will rise to $410,700 in 2025 and to $420,000 in 2026. The annual 30-year fixed mortgage rate will slide to 5.9% in 2025 but then move higher to 6.1% in 2026.
Pending home sales regional breakdown
The Northeast PHSI expanded 6.5% from last month to 65.6, up 3.3% from September 2023. The Midwest index surged 7.1% to 75.0 in September, identical to the previous year.
The South PHSI improved 6.7% to 89.0 in September, unchanged from a year ago. The West index rose 9.8% from the prior month to 64.0, up 12.3% from September 2023.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of 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 can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.
The index is based on a sample that covers about 40% of multiple listing service data each month. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity 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, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
© 2024 National Association of Realtors® (NAR)
