The numbers: The number of home buyers who signed a contract to purchase a home in August jumped, far exceeding economists’ expectations.
Pending home sales rose 8.1% in August compared with July, the National Association of Realtors reported Wednesday. Economists polled by MarketWatch had projected a 0.4% increase for pending home sales in August.
Still, compared with a year ago, pending sales were down 8.3%, reflecting how much home-buying activity has fallen from the boom last summer and fall.
The pending home sales index measures real-estate transactions where a contract was signed for a previously-owned home, but the sale had yet to close, and it is benchmarked to contract-signing activity in 2001. The index provides insight as to the direction existing-home sales figures will take in the months to come, which is based on closed transactions.
“‘Rising inventory and moderating price conditions are bringing buyers back to the market.’”
“Rising inventory and moderating price conditions are bringing buyers back to the market,” Lawrence Yun, chief economist for the National Association of Realtors, said in the report. “Affordability, however, remains challenging as home-price gains are roughly three times wage growth.”
Every region saw home sales increase on a monthly basis, led by a 10.4% gain in the Midwest.
The big picture: August’s surge in pending home sales underscores how there’s reason to be upbeat on the outlook for the housing market. Looking to mortgage applications data, the recent trend has shown signs of stabilization in the demand for loans used to purchase homes, despite weekly fluctuations in the data.
Mortgage applications data can often be an indicator for home sales more generally. But the preponderance of cash buyers in today’s housing marketplace means that this data may miss a large chunk of the demand for housing right now, according to Ian Shepherdson, chief economist for Pantheon Macroeconomics.
“The bigger picture in the housing market is that demand is reviving somewhat after dropping steeply in the first half of the year, probably due to a combination of falling mortgage rates, easier lending standards and — perhaps — a second wavelet of people heading to the suburbs from the cities as the Delta wave struck,” Shepherdson said in a research note.
What they’re saying: “Real estate markets are moving toward a new equilibrium, as the pandemic frenzy to find a more spacious home in greener suburbs and lock-in historically-low rates has given way to a more tempered search for affordability. Record-high prices are motivating buyers to be more selective, and with monetary tightening expected to push rates higher, buyers are likely to become even more cost-conscious,” said George Ratiu, manager of economic research at Realtor.com.