Pending-home sales skyrocketed 8.8 percent between July and August, another massive jump after the spring standstill caused by the coronavirus pandemic.
Contract signings rose 24.2 percent year over year, according to data released Wednesday by the National Association of Realtors. The Pending Home Sales Index (PHSI), a forward-looking indicator of future sales based on contract signings, is currently at 132.8, the highest it’s been all year and, in many cases, outperforming pre-pandemic averages.
The rise in pending sales, which has been consistent throughout the summer, can be attributed to the pent-up demand brought about by the standstill observed when the coronavirus pandemic first broke out as well as the low interest rates that have allowed some buyers to jump on a purchase.
“Tremendously low mortgage rates – below 3 percent – have again helped pending home sales climb in August,” NAR Chief Economist Lawrence Yun said in a statement. “Additionally, the Fed intends to hold short-term fed funds rates near 0 percent for the foreseeable future, which should in the absence of inflationary pressure keep mortgage rates low, and that will undoubtably aid homebuyers continuing to enter the marketplace.”
But while pending sales remain high, Yun also pointed out that not all contract signings lead to a closed sale since securing a mortgage does not necessarily guarantee that a homebuyer will have enough liquid assets to make a down payment. Final statistics may paint a less optimistic picture.
All four regions in the U.S. saw increases in contract signings. At 13.1 percent, the West experienced the biggest increase, up 23.6 percent from the same period last year. The Midwest, the South and the Northeast saw increases of 8.6, 8.6 and 4.3 percent, respectively.
“While I did very much expect the housing sector to be stable during the pandemic-induced economic shutdowns, I am pleasantly surprised to see the industry bounce back so strongly and so quickly,” Yun said.