The Pending Home Sales Index is a leading indicator of housing activity. It measures housing contract activity and is based on signed real estate contracts for existing single-family homes, condos, and co-ops. When a seller accepts a sales contract on a property, it is recorded into a Multiple Listing Service (MLS) as a “pending home sale.” Most pending home sales become home sale transactions, typically one to two months later.
Pending Home Sales in March 2023
The National Association of Realtors collects pending home sales data from MLSs and large brokers. They reported a decrease in pending home sales in March, the first decline since November 2022. While the South saw a slight increase, three U.S. regions posted monthly losses. Additionally, all four regions experienced year-over-year declines in transactions. The Pending Home Sales Index (PHSI) fell by 5.2% to 78.9 in March, and pending transactions dropped by 23.2% year over year.
Key Highlights
- Pending home sales dropped in March, down 5.2% from February.
- Month over month, contract signings fell in three U.S. regions but increased slightly in the South.
- Pending home sales retreated in all four regions compared to one year ago.
ALSO READ: United States Existing Home Sales Trends
The NAR Chief Economist, Lawrence Yun, has cited a lack of housing inventory as a major constraint to rising sales, with limited housing supply not meeting demand nationally. While the economy is predicted to continue adding jobs, Yun expects mortgage rates to drop, with the 30-year fixed mortgage rate progressively falling to 6.0% this year and to 5.6% in 2024. Housing starts will fall from last year by 7.3% in 2023, to 1.44 million, and then increase by 6.9% in 2024, to 1.54 million.
Regional Breakdown of the Pending Home Sales
The Northeast PHSI fell 8.1% from last month to 66.6, a decline of 24.3% from March 2022. The Midwest index dropped 10.7% to 75.7 in March, down 21.5% from one year ago. The South PHSI improved 0.2% to 99.6 in March, falling 19.8% from the prior year. The West index decreased 8.0% in March to 59.4, reducing 32.2% from March 2022.
Existing-Home Sales Forecast
NAR anticipates existing-home sales will steadily improve in the upcoming months but will still come up short on an annual figure. Existing-home sales will drop from the prior year by 9.3% in 2023, to 4.56 million, before increasing by 15.4% in 2024, to 5.26 million.
Newly Constructed Home Sales Forecast
Newly constructed home sales will increase from last year by 4.5% in 2023, to 670,000, due to more plentiful inventory in this segment of the market, and increase by another 11.9% in 2024, to 750,000.
Median Existing-Home and New Home Prices
Compared to last year, NAR forecasts that median existing-home prices will mostly stabilize – with the national median existing-home price decreasing by 1.8% in 2023, to $379,600, and then improving by 2.8% in 2024, to $390,000. The expensive West region of the U.S. will see lower prices, but the affordable Midwest region will likely squeak out a positive gain. The median new home price will be lower by 1.9% in 2023, to $449,100, followed by an improvement of 4.2% in 2024, to $468,000.
Summary
The decline in pending home sales in March highlights the ongoing challenges faced by the housing market due to the lack of housing inventory not meeting national demand. However, with continued job gains and improving interest rates, NAR anticipates that sales will improve in the upcoming months, especially in the newly constructed home sales segment, where inventory is expected to increase. The regional breakdown of the Pending Home Sales Index shows a decline in all four regions, with the South being the only region to post a slight increase.
NAR's Chief Economist, Lawrence Yun, cites the limited housing supply as a major constraint to rising sales and expects housing starts to fall in 2023 before increasing in 2024. NAR forecasts a drop in existing-home sales in 2023 but an increase in 2024, with the national median existing-home price stabilizing and the median new home price decreasing in 2023 before improving in 2024. Overall, while the housing market faces challenges, there are also opportunities for growth and improvement in the upcoming years.
Pending Home Sales Trends (Previous Months)
The table shows data from January 2022 to January 2023 regarding pending home sales in four regions of the United States – Northeast, Midwest, South, and West. The West region had the lowest index level at 66.2, while the South had the highest index level at 99.2. All four regions saw an increase in contract signings from the previous month, with the West region having the largest increase at 10.15%, followed by the South region with an increase of 8.3%.
All four regions saw a decline in contract signings compared to the same month of the previous year, with the West region having the largest decline at 30.46%, followed by the South region with a decline of 26.3%. Overall, the total pending home sales index level for January 2023 was 82.5, which was a decrease of 24.66% compared to the same month of the previous year.
Here is the tabular data of pending home sales from January 2022 to January 2023. The units displayed are in thousands and are the seasonally adjusted annual rate.
Source:
- https://www.nar.realtor/research-and-statistics/housing-statistics/pending-home-sales
- https://www.nar.realtor/newsroom/pending-home-sales-decreased-5-2-in-march
