Two new data reports released today have reaffirmed the strength of the housing market.
The National Association of Realtors (NAR) is announcing its Pending Home Sales Index (PHSI) hit a record high in August with a 132.8 reading, up 8.8% from July and up 24.2% from August 2019. All four regional indices recorded month-over-month increases in contract activity during August: The Northeast PHSI grew 4.3% to 117.1, the Midwest index was up 8.6% to 124.5, the South rose by 8.6% to an index of 154.2 and the West ascended by 13.1% to 120.3.
An index of 100 is equal to the level of contract activity in 2001. NAR Chief Economist Lawrence Yun credited “tremendously low mortgage rates” in fueling the pending home sales activity last month, adding that the Federal Reserve’s plan to keep short-term fund rates near the 0% level “should, in the absence of inflationary pressure, keep mortgage rates low, and that will undoubtedly aid homebuyers continuing to enter the marketplace.”
Yun added that he was “pleasantly surprised to see the industry bounce back so strongly and so quickly” despite the economic chaos brought by the COVID-19 pandemic. But he also warned that housing demand is still out of balance with existing supply and prices are showing no signs of going down.
“Home prices are heating up fast,” he said. “The low mortgage rates are allowing buyers to secure cheaper mortgages, but many may find it harder to make the required down payment.”
Separately, CoreLogic’s latest Home Price Index recorded a 5.5% annual price growth in July, which was roughly two percentage points greater than the prior July despite a more chaotic economic picture.
CoreLogic also released a new Pending Index forecast based on a composite of 20 major metro areas, with a 5.1% year-over-year increase in August that would be the biggest gain since January 2019, followed by a 5.5% year-over-year increase in September. Among the metros in this index, Phoenix was the most vibrant market with a projected 9.2% year-over-year growth in September—in comparison, that market’s pre-COVID year-over-year level in March was 8.2%.
CoreLogic’s report echoed the NAR analysis that credited low mortgage rates and increased buyer demand. Nonetheless, CoreLogic’s Pending Index forecast is predicting some CBSAs—including San Francisco, Las Vegas, Detroit and Miami—will have lower annual growth in September compared to their markets in the pre-pandemic months.