Pending home sales retreated slightly in September, following a previous month of growth, according to the National Association of Realtors (NAR). Each of the four major U.S. regions saw contract activity decline month-over-month and year-over-year, with the Northeast weathering the largest yearly drop.
The NAR Pending Home Sales Index (PHSI), a forecasting indicator of home sales based on contract signings, fell 2.3% to 116.7 in September. Year-over-year signings decreased 8%. For reference, an index level of 100 would match the level of contract activity in 2001.
“Contract transactions slowed a bit in September and are showing signs of a calmer home price trend, as the market is running comfortably ahead of pre-pandemic activity,” said Lawrence Yun, NAR’s chief economist. “It’s worth noting that there will be less inventory until the end of the year compared to the summer months, which happens nearly every year.”
The Northeast PHSI fell 3.2% to 93.1 in September, marking an 18.5% decline in pending home sales from a year ago. In the Midwest, PHSI dropped 3.5% to 111.4 last month, down 5.8% from September 2020.
Meanwhile, pending home sales for the South fell 1.8% to 139.1 in September, decreasing 5.8% from a year ago. The index in the West declined 1.4% to 105.3 in September, decreasing 7.2% from the year prior.
“Some potential buyers have momentarily paused their home search with intentions to resume in 2022,” Yun continued. “Rents have been mounting solidly of late, with falling rental vacancy rates. This could lead to more renters seeking homeownership in order to avoid the rising inflation, so an increase in inventory will be welcomed.”
Out of the largest 40 metros in the U.S. the most improved metros over the past year, leading up to October 21, were Orlando-Kissimmee-Sanford, Fla.; Jacksonville, Fla.; Tampa-St. Petersburg-Clearwater, Fla.; Nashville-Davidson-Murfreesboro-Franklin, Tenn.; and Denver-Aurora-Lakewood, Colo.
Once the home sales data is fully tabulated at the end of the year, NAR forecasts home sales to have risen by 6.4% in 2021. Also, due to higher anticipated mortgage rates, NAR expects sales to decline by 1.7% in 2022. Yun said that home prices will moderate with only 2.8% growth in 2022 after a double-digit price gain of 14.7% in 2021.
