“It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” said Lawrence Yun, NAR’s chief economist. “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.”
In light of the apparent housing market turnaround, NAR has raised its forecast for the market. For all of 2020, existing-home sales are expected to decline by only 3%, with sales ramping up to 5.6 million by the fourth quarter. New home sales are projected to rise by 3%.
Yun expects that the positive GDP growth of 4% in 2021 will boost both existing and new home sales, which he forecasts to grow by 7% and 16%, respectively. Mortgage rates are anticipated to stay at near 3% over the next 18 months. Home prices will likely appreciate 4% in 2020, before moderating to 3% in 2021 as more new supply reaches the market, according to Yun.
June Pending Home Sales Regional Breakdown
The month of June saw each of the four regional indices rise on a month-over-month basis, marking two consecutive months of such gains.
The Northeast PHSI grew 54.4% to 95.4 in June, but was still down 0.9% from a year ago. In the Midwest, the index rose 12.2% to 110.9 last month, up 5.1% from June 2019.
Pending home sales in the South increased 11.9% to an index of 140.3 in June, up 10.3% from June 2019. The index in the West jumped 11.7% in June to 99.6, up 4.7% from a year ago.
“The Northeast’s strong bounce back comes after a lengthier lockdown, while the South has consistently outperformed the rest of the country,” Yun said. “These remarkable rebounds speak to exceptionally high buyer demand.”
Yun says that as house hunters seek homes away from bigger cites – likely in an effort to avoid the coronavirus – properties that were once an afterthought for potential buyers are now growing in popularity.
According to data from realtor.com®, metros with suburbs that most recently saw the highest gains in hotness rankings include Columbia, S.C.; Little Rock, Ark.; Greensboro, N.C.; Tulsa, Okla.; and Cape Coral, Fla.
“While the outlook is promising, sharply rising lumber prices are concerning,” Yun said. “A reduction in tariffs – even if temporary – would help increase home building and thereby spur faster economic growth.”
The National Association of Realtors® is America’s largest trade association, representing more than 1.4 million members involved in all aspects of the residential and commercial real estate industries.
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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
NOTE: Existing-Home Sales for July will be reported on August 21. The next Pending Home Sales Index will be August 27; all release times are 10:00 a.m. ET.