After a lackluster summer, pending home sales surprised observers with an August rebound, posting a substantial increase according to the National Association of Realtors (NAR).
The organization’s Pending Home Sales Index increased 8.1% month over month in August, reaching a reading of 119.5. An index reading of 100 is equal to the level of contract signings in 2001.
Signings are still down year over year, with August’s index reading 8.3% below that of the same month last year. But with economists polled by various outlets expecting monthly increases of no more than 1.5%, August’s unanticipated jump in pending sales still mark a significant, welcome improvement.
“Rising inventory and moderating price conditions are bringing buyers back to the market,” said Lawrence Yun, NAR’s chief economist. “Affordability, however, remains challenging as home price gains are roughly three times wage growth.”
In the long term, such market imbalance is unsustainable, Yun cautioned. In the meantime, contract signing activity is more pronounced in the areas of the country where affordability is most tilted toward the buyer — especially with many workers still able to do their jobs remotely.
“The more moderately priced regions of the South and Midwest are experiencing stronger signing of contracts to buy, which is not surprising,” Yun said. “This can be attributed to some employees who have the flexibility to work from anywhere, as they choose to reside in more affordable places.”
Pending home sales in the South are up 8.6% from July to an index of 141.8. In the Midwest, the index is up to 115.4, up 10.4%.
The West and Northeast also saw increases, though they were less sizeable, growing 7.2% (to 107.0) and 4.6% (to 96.2%), respectively.