Pending Home Sales Index Spurts in June to Near Two-Year High

Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • National Association of Realtors’ May Pending Home Sales Index (PHSI) SHOT UP 2.8 percent in June to 108.3;
  • Year-year the index INCREASED 1.2 percent.

Trends:

  • The pending home sales index reached its highest point since December 2017
  • The Index was up year-year for the first time since December 2017

Data Source: National Association of Realtors (NAR)

Image result for pending home sales

It may be time for realtors to break out the champagne – or at least put some on ice.

After almost two years of struggling sales, the National Association of Realtors reported a sharp increase in its pending home sales index which tracks contracts for sale. The index reached its highest level since December 2017 and the first year-year increase since December 2017.

The increase in the index in June marked the second consecutive monthly gain, a milestone which hasn’t happened in over a year: February-March 2018. The last time the index improved (or failed to drop) for three straight months was October-November-December 2017.

The combination of lower mortgage rates and slower price increases may have worked the magic for the home resale market although last week, the Census Bureau and Department of Housing and Urban Development reported new home sales rose 7.0 percent in June, the strongest month-month gain since January. The government report, like the NAR’s pending home sales data, tracks contracts for sale. The NAR, unlike the government, also reports on closings, but of existing homes.

Existing home sales (closings) fell 1.7 percent in June, two months after the NAR’s PHSI fell 1.5 percent. For May, the NAR reported closings increased 2.9 percent, two months after the PHSI increased 3.9 percent.

The increase in May closings came even after the median price for an existing single-family home rose 4.2 percent to $278,200. In June the median price of an existing single-family home rose again, up 2.7 percent, to $285,700. The median price of an existing single-family home has gone up for five straight months tempered by a drop in the average rate for a 30-year fixed rate loan from 4.37 percent in February to 3.80 in June.

The NAR report suggests closings in July and August will increase, perhaps salvaging what has been a weak year for home sales. The weakness in the housing market was underscored last week when the Census Bureau reported a dip in the homeownership rate, the second consecutive quarterly decline in that measure.

The weaker home sales market has had broader implications. In addition to a slowdown at related retail stores, the sales slump affected seniors who were counting on proceeds from the sale of their homes to fund retirement.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.

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