Pending Home Sales Increase in August; Still down 20 percent from year ago

Dennis Norman

Pending home sales rise for 2nd consecutive month in August –

The National Association of REALTORS Pending Home Sales Index for August shows an increase of 4.3 percent in the index from the month before (seasonally adjusted), which is 20.1 percent below a year ago.

Here are highlights from the report:

  • August’s pending home sales index (seasonally adjusted) was 82.3 (the index is based upon 100.0 being equal to the average level of sales activity in 2001 which we could call the last “normal” year) which is the fourth lowest level the index has hit since NAR began the index in 2001.
  • August’s not-seasonally adjusted index index was 90.9, a 6.4 percent increase from July and an 18.4 percent decrease from a year ago.
  • All regions in the U.S., except the Northeast, saw month-over-month gains and all the regions had year-over-year declines in pending home sales.

Lawrence Yun, NAR chief economist, said the latest data is consistent with a gradual improvement in home sales in upcoming months. “Attractive affordability conditions from very low mortgage interest rates appear to be bringing buyers back to the market,” he said. “However, the pace of a home sales recovery still depends more on job creation and an accompanying rise in consumer confidence.”

Although Yun expects a continuing steady rise in home sales from favorable affordability conditions and some job creation, he cautioned any sudden rise in mortgage rates could slow the recovery. “Current low consumer price inflation has helped keep mortgage interest rates very attractive this year. However, recent rising trends in producer prices at the intermediate and early stages of production, along with very high commodity prices, are raising concerns about future inflation and future mortgage interest rates,” he said. “Higher inflation would mean higher mortgage interest rates. In the meantime, housing affordability is hovering near record highs.”

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