Pending Home Sales Index Up After Three Down Months

Mark Lieberman

Managing Director and Senior Economist


  • National Association of Realtors’ Pending Home Sales Index (PHSI) INCREASED 1.5 percentage points in June to 110.2;
  • PHSI for May was revised up 0.9 percentage points
  • Year-year the index IMPROVED 0.5 percentage points.

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Buyers may be trickling back to the housing market, according to a new report Monday by the National Association of Realtors which showed its Pending Home Sale Index (PHSI) improved 1.5 percent in June the first improvement four months.

The report, which tracks signed contracts for existing or used homes, is the equivalent of the government’s new home sales report which last week showed a 0.8 percent improvement for June.

The suggested bump in home sales couldn’t come at a better time for realtors who’ve seen sales of existing homes dribbling down to the lowest level since February as the median price of an existing single family home continues to rise.

A pending home sale is a necessary precursor to a completed sale. As pending home sales dipped in April, closed home sales fell in June; with another dip in pending sales in May closings could fall again in July.

Closinga edged up in May despite a decline in the PHSI for March as homebuyers tried to accelerate closings in anticipation of an increase in interest rates by the Federal Open Market Committee. The FOMC actions on the fed funds rate don’t directly affect mortgage rates, they contribute to a general market movement which ultimately moves rates for home loans.

The main culprit for the sluggish home sales has been an absence of inventory as empty-nesters appear reluctant to put their homes on the market just as 25-34 years olds, the prime homebuying age cohort, have themselves been trending away from home buying.

The steady increase in the median price of an existing single family home should spark an increase in inventory but recent data on homeownership suggests a lack of enthusiasm for homeownership. The homeownership rate improved slightly in the second quarter but the number of households declined reducing demand. He higher prices – and higher rates – could make homeownership even less affordable.

An increase in home sales, as suggested by the NAR and government reports, would be welcome news for the real estate and construction sectors but higher prices are a two-edged sword as earnings continue to increase very slowly. With inflation creeping up as well, along with interest rates, prospective buyers could be caught in a dollar squeeze.

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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