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Economy in Brief

U.S. Pending Home Sales Increase Amidst Lower Interest Rates
by Gerald D. Cohen  June 27, 2019

The National Association of Realtors (NAR) reported that pending home sales rose 1.1% in May (-0.7% year-on-year), reversing much of April's 1.5% decrease. Meanwhile, mortgage rates continue on their downtrend. The effective rate on a 15-year fixed-rate mortgage declined to 3.85% in May, the lowest level since the end of 2017. The declining trend in interest rates has had a positive impact on housing activity. Pending sales are up 6.8% since the four-and-a-half year low reached at the end of last year.

The number of signed contracts in May increased in every region of the country except the West, where they declined 1.8% (-3.1% y/y). Pending sales jumped 3.6% in the Midwest and 3.5% in the Northeast (-1.2% and -0.5% y/y respectively). Sales edged up 0.1% in the South (+0.7% y/y).

The pending home sales index measures sales at the time the contract for an existing home is signed, analogous to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity anticipates the level of closed existing home sales in the following two months. The series dates back to 2001, and the data are available in Haver's PREALTOR database. Mortgage interest rates from the Mortgage Bankers Association can be found in the SURVEYW database.

Pending Home Sales (SA, 2001=100) May Apr Mar May Y/Y % 2018 2017 2016
Total 105.4 104.3 105.9 -0.7 104.7 109.1 109.8
   Northeast 92.0 88.9 90.5 -0.5 92.4 97.1 96.4
   Midwest 100.3 96.8 95.6 -1.2 100.2 104.9 107.4
   South 124.1 124.0 127.2 0.7 121.6 123.9 123.0
   West 91.8 93.5 95.2 -3.1 92.3 99.5 102.3
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