This morning the National Association of Realtors released the August data for their Pending Home Sales Index. Here is an excerpt from the latest press release:
Lawrence Yun, NAR chief economist, says this summer’s terribly low supply levels have officially drained all of the housing market’s momentum over the past year. “August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes,” he said. “Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search.”
With little relief expected from the housing shortages that continue to plague several areas, Yun believes the housing market has essentially stalled. Further complicating any sales improvement in the months ahead is the fact that Hurricane Harvey’s damage to the Houston region contributed to the South’s decline in contract signings in August, and will likely continue to do so in the months ahead. Furthermore, the temporary pause in activity in Florida this month in the wake of Hurricane Irma will slow overall sales even more in the South. (more here).
The chart below gives us a snapshot of the index since 2001. The MoM change came in at -2.6%. Investing.com had a forecast of -0.5%.
Over this time frame, the US population has grown by 14.8%. For a better look at the underlying trend, here is an overlay with the nominal index and the population-adjusted variant. The focus is pending home sales growth since 2001.
The index for the most recent month is 16% below its all-time high in 2005. The population-adjusted index is 24% off its 2005 high.
Pending versus Existing Home Sales
The NAR explains that "because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing Home Sales by a month or two." Here is a growth overlay of the two series. The general correlation, as expected, is close. And a close look at the numbers supports the NAR's assessment that their pending sales series is a leading index.
