October’s Pending Home Sales Index (PHSI), a forward-looking indicator of future sales based on contract signings, was up 20.2 percent from October 2019, but down 1.1 percent from September.
“Pending home transactions saw a small drop off from the prior month but still easily outperformed last year’s numbers for October,” NAR Chief Economist Lawrence Yun said in a statement. “The housing market is still hot, but we may be starting to see rising home prices hurting affordability.”
Each region tracked by the National Association of Realtors experienced year-over-year gains in contract activity, but only the South posted a monthly gain. In October, the PHSI hit 128.9, with a score of 100 being equal to the level of contract activity in 2001, when the metric was first tracked by NAR.
The numbers are still outperforming last year’s totals, but record-low inventory is putting a crunch on affordability, even as mortgage rates set historic lows.
“The combination of these factors – scarce housing and low rates — plus very strong demand has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers, who don’t have the luxury of using housing equity from a sale to use as a down payment,” Yun said. “Work-from-home flexibility has also increased the demand for both primary and secondary homes.”