A Historic Rebound for the Housing Market
Pending Home Sales increased by 44.3% in May, marking the highest month-over-month gain in the index since the National Association of Realtors (NAR) began tracking this metric in January 2001. But what exactly are pending home sales, and why is this rebound important? According to NAR, the Pending Home Sales Index (PHS) is:
“A leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos, and co-ops. 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.”
Pending home sales measure how many existing homes went into contract in a given month. After a contract is signed, closing typically occurs about two months later, depending on the state.
Why is this rebound important?
During the COVID-19 pandemic and economic shutdown, pending home sales declined sharply. In May, however, the number of homes going into contract increased dramatically:
This surge shows that buyers are actively back in the market. Lawrence Yun, Chief Economist at NAR, mentioned:
“This has been a spectacular recovery for contract signings and shows the resiliency of American consumers and their evergreen desire for homeownership…This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”
To sustain this trend, more homes need to be on the market. Yun adds:
“More listings are continuously appearing as the economy reopens, helping with inventory choices…Still, more home construction is needed to counter the persistent underproduction of homes over the past decade.”
As the year progresses, more houses will be built, helping alleviate a portion of the inventory shortage. Yet overall inventory remains low, creating an opportunity for homeowners ready to sell. Over the last 12 months, supply has decreased year-over-year, lagging behind buyer demand:
Bottom Line
If you decided not to sell this spring due to the health crisis, now may be the perfect time to jump back into the market while buyers are actively looking. Let’s connect today to determine your best move forward.
