The Pending Home Sales Index (PHSI), a forward-looking indicator of future sales based on contract signings, continued its strong recovery, climbing 16.6 percent month over month and 6.3 percent year over year in June.
The index, compiled by the National Association of Realtors (NAR), reached 116.1 in June, with an index level of 100 being equal to contract activity in 2001.
The increase in pending home sales comes on the heels of May’s record-setting 44.3 percent month-over-month gain.
“It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” NAR Chief Economist Lawrence Yun said in a statement. “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.”
The recent housing market turnaround has lead NAR to revisit its forecast for the housing market. Yun expects existing-home sales to only decline by 3 percent and new home sales to actually rise 3 percent, despite the housing market pause at the height of COVID-19.
All four regional indices — Northeast, South, Midwest and West — increased month over month, for the second straight month. The Northeast, the area that was first hit the hardest by COVID-19, saw a massive 54.4 percent jump, month over month.
“The Northeast’s strong bounce back comes after a lengthier lockdown, while the South has consistently outperformed the rest of the country,” Yun said. “These remarkable rebounds speak to exceptionally high buyer demand.”
The impacts of the country’s initial social distancing efforts appear to have had a more lasting impact on supply, rather than demand, as new listings remain well below 2019 levels, according to Ruben Gonzalez, the chief economist at Keller Williams. But it’s still too early to see what the re-emergence of the virus will do to demand.
“It’s still not clear to what extent demand has been impacted in the second half of July by the case surge, but we expect to see some drop-off in demand as social distancing increases,” Gonzalez said. “Recent innovations that have made virtual tours straightforward and consumers adapting to fewer in-person showings are likely to reduce some of the impact of the surge.”
The increased demand and low level of supply is likely to create further price appreciations, according to Gonzalez.
“If we see a further slowing in the pace of new listings coming on the market as a result of the recent surge in coronavirus cases, and mortgage rates continue to spur demand, we could continue to see upward pressure on home prices,” Gonzalez said.