Last week’s release of the National Association of Realtor’s (NAR) Pending Home Sales Index (PHSI) showed the contract activity for purchasing existing single-family houses, condos, townhomes, and apartments exploded in May, soaring by 44.3 percent to 99.6. It was the greatest single month increase since NAR started tracking pending sales in 2001. Every major region recorded an increase in month-over-month activity, while the South also had a year-over-year increase in pending transactions.
The PHSI had suffered two straight months of declines as the corona virus shut down businesses and left Americans sheltering in place. It fell by 21.8 percent in April, the largest single month plunge on record, coming on top of a 20.8 percent loss in March. This left the Index at 69.0, 33.8 percent lower than in May 2019. Even with the May surge, pending sales are down 5.1 percent year-over-year.
According to Lawrence, Chief Economist for the NAR:
“This has been a spectacular recovery for contract signings, and goes to show 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.”
“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.”
Yun was not alone in expecting a recovery last month although none of the analysts polled knew the degree. Most forecasted within a range of a 6.8 to 25.0 percent increase with a consensus of 11.3 percent.
The PHSI is a leading indicator. It is expected to correlate with sales of existing homes over the following one to two months.
“The outlook has significantly improved, as new home sales are expected to be higher this year than last, and annual existing-home sales are now projected to be down by less than 10 percent – even after missing the spring buying season due to the pandemic lockdown.”
The NAR now predicts existing home sales will reach 4.93 million units in 2020 and new home sales will hit 690,000. All figures light up in 2021 with positive GDP, employment, housing starts and home sales. Yun also noted that in 2021, sales are forecast to rise to 5.35 million units for existing homes and 800,000 for new homes.
Last month, after Yun declared April would be the low spot for pending home sales, he added that May will mark the bottom for closed sales of existing homes.
Source: Mortgage News Daily
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