Courtesy of Doug Short’s Advisor Perspectives.
This morning the National Association of Realtors released the May data for their Pending Home Sales Index. “With demand holding firm this spring and homes selling even faster than a year ago, the notable increase in closings in recent months took a dent out of what was available for sale in May and ultimately dragged down contract activity,” he said. “Realtors® are acknowledging with increasing frequency lately that buyers continue to be frustrated by the tense competition and lack of affordable homes for sale in their market.” (more here). The chart below gives us a snapshot of the index since 2001. The MoM change came in at -3.7%. Investing.com had a forecast of -1.1%.
Over this time frame, the US population has grown by 14.0%. For a better look at the underlying trend, here is an overlay with the nominal index and the population-adjusted variant. The focus is pending home sales growth since 2001.
The index for the most recent month is 13% below its all-time high in 2005. The population-adjusted index is 20% off its 2005 high.
Pending versus Existing Home Sales
The NAR explains that “because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing Home Sales by a month or two.” Here is a growth overlay of the two series. The general correlation, as expected, is close. And a close look at the numbers supports the NAR’s assessment that their pending sales series is a leading index.
For additional perspectives on residential real estate, here is the complete list of our monthly updates:
