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. Here are the latest Pending home sales trends for March 2024.
Pending Home Sales Report March 2024: A Detailed Analysis
There's positive news for the US housing market! The National Association of Realtors (NAR) recently announced a 3.4% increase in pending home sales for March 2024. This marks a welcome change after a period of sluggish activity. Let's delve deeper into the report to understand the regional trends and what NAR forecasts for the future.
Regional Market Performance
The national numbers paint a generally positive picture, but a closer look reveals a more nuanced reality across different regions. The Northeast, South, and West all experienced a rise in contract signings compared to February. This suggests a potential uptick in buyer activity in these areas. However, the Midwest saw a slight dip, indicating a cooler market there.
Year-over-year figures also present a mixed bag. The Northeast and South witnessed a decline in pending sales compared to March 2023. This could be due to factors like a lack of inventory or a shift in buyer preferences in those regions. However, the Midwest and West regions displayed improvement, suggesting these areas might be attracting buyers looking for a change of scenery or more affordable options.
Looking Forward: A Cautiously Optimistic Outlook
The Pending Home Sales Index (PHSI), a leading indicator of future existing-home sales, rose to 78.2 in March. This is the highest point in a year, although it remains relatively flat compared to the past 12 months. Industry experts like NAR Chief Economist Lawrence Yun acknowledge this, highlighting the need for declining mortgage rates and a rise in available properties for a significant and sustained increase in sales.
NAR's Economic Projections
Despite the current limitations, NAR forecasts a positive outlook for the housing market. They predict a 9% increase in existing-home sales for 2024, reaching 4.46 million units (compared to 4.09 million in 2023). This growth is expected to continue in 2025, with a projected rise of 13.2% to 5.05 million units. This optimism is likely fueled by factors like a growing population and the inevitable need for more housing.
The forecast also anticipates a modest increase in housing starts, with a 1.2% rise in 2024 and a 4.9% jump in 2025. This suggests that builders are anticipating a rise in demand and are taking steps to meet it.
Balancing Growth with Affordability
NAR expects median home prices to continue their upward trend, albeit at a slower pace compared to recent years. This is a welcome sign for sellers but could raise concerns about affordability for first-time buyers. They project a 1.8% increase in 2024, reaching a record high of $396,800. This growth is expected to persist in 2025, with prices reaching an estimated $403,800.
The forecast for new homes is slightly different. NAR anticipates a slight decrease of 0.6% in 2024, with the median price settling at $426,100. This is attributed to the construction of smaller homes, which might be more appealing to first-time buyers or those looking to downsize. However, a rebound of 3.4% is predicted for 2025, pushing the median price to $440,500.
Pending Home Sales Take a Regional Route
While the national picture for pending home sales showed a 3.4% increase in March, a closer look reveals a more regional story. Here's a breakdown of how each region performed:
- Northeast: Despite a 2.7% monthly gain in the PHSI to 65.1, the Northeast continues to lag behind last year, with a 0.3% year-over-year decline. This suggests a slower pace of buyer activity compared to March 2023.
- Midwest: The Midwest saw a dip of 4.3% in the PHSI compared to February, landing at 78.1. However, there's a positive sign when looking year-over-year. The Midwest index is up 1.3% compared to March 2023, indicating some growth potential in the region.
- South: The South emerged as the most promising region in March. The PHSI jumped 7.0% from the previous month, reaching 95.8. Despite this positive movement, the South still faces a 1.5% year-over-year decline, suggesting a potential cooling off from the previous year's highs.
- West: The West mirrored the national trend with a 6.8% monthly increase in the PHSI, reaching 61.0. This region also boasts the strongest year-over-year performance, with a 3.6% rise compared to March 2023. This suggests consistent buyer interest in the Western market.
Impact on Affordability
NAR Chief Economist Lawrence Yun emphasizes the concern of rising home prices outpacing income growth, particularly for first-time buyers. This highlights the need for a balance between seller benefits and buyer affordability.
Inventory on the Rise
Yun predicts a gradual increase in available properties, fueled by recent growth in home construction. Additionally, he expects a rise in listings from sellers who delayed putting their homes on the market in the past two years. These new listings could cater to changing life circumstances, such as growing families, job relocations, or retirees seeking new locations.
Overall, the regional breakdown of pending home sales paints a picture of a market with varying levels of activity. While the South and West show promise, the Northeast and Midwest might see a slower pace. The anticipated rise in inventory could offer some relief for affordability concerns, but it remains to be seen how these regional trends will unfold in the coming months.
ALSO READ: United States Existing Home Sales Trends
ALSO READ: Will the Housing Market Crash Again?
Pending Home Sales Trends (Previous Year)
The table shows data from regarding pending home sales in four regions of the United States – Northeast, Midwest, South, and West. The data reveals interesting trends in pending home sales across the regions. The National Association of Realtors (NAR) publishes monthly data on pending home sales, which is seasonally adjusted and presented in the form of a seasonally adjusted annual rate (SAAR) in thousands.
In December 2023, the Pending Home Sales Index (PHSI) for the Northeast stood at 62.3, reflecting a decline of 3.26% from the previous month and a year-over-year decrease of 3.86%. This indicates a challenging month for the Northeastern housing market, facing both short-term and long-term declines in pending home sales. However, it's essential to consider these variations in the context of the broader economic factors influencing the region.
Conversely, the Midwest experienced a positive month, with a PHSI of 80.5 in December, representing a month-over-month increase of 5.64% and a year-over-year growth of 4.27%. This suggests a robust real estate market in the Midwest, characterized by increasing demand and positive momentum. The Midwest's resilience in both short-term and long-term metrics points to a favorable environment for home sales.
The Southern region demonstrated remarkable strength in December, recording a PHSI of 93.0, indicating a substantial month-over-month increase of 11.78% and a modest year-over-year growth of 1.53%. The South's performance highlights a buoyant real estate market with a significant surge in pending home sales, making it a key contributor to the overall positive trends observed in the national data. The robust month-over-month increase showcases the region's responsiveness to market dynamics.
Similarly, the West displayed a robust performance in December, boasting a PHSI of 61.0. This represents an impressive month-over-month increase of 12.96% and a steady year-over-year growth of 1.50%. The West's housing market exhibits resilience and adaptability, responding positively to changing conditions. The substantial month-over-month increase indicates a strong demand for homes in the region, aligning with broader market trends.
Examining the total data, the national PHSI in December was 77.3, with a month-over-month change of 7.96% and a modest year-over-year growth of 1.31%. This comprehensive view of pending home sales across the United States reflects a generally positive trend, driven by the robust performance of specific regions. The month-over-month increase in the total index indicates a widespread demand for homes, contributing to the overall health of the real estate market.
Here is the tabular data of pending home sales from Dec 2022 to Dec 2023. The units displayed are in thousands and are the seasonally adjusted annual rate.
The Pending Home Sales Index Explained
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. Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales.
Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues. According to the National Association of REALTORS®, the index is based on a sample that covers about 40% of multiple listing service data each month.
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 equals 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.
Source:
- https://www.nar.realtor/research-and-statistics/housing-statistics/pending-home-sales
- https://www.mortgagenewsdaily.com/data/pending-home-sales