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Economy in Brief

Pending Home Sales Fell Again in October
by Sandy Batten  November 30, 2020

• Second monthly decline in pending home sales after four consecutive monthly increases.

• Sales drop concentrated in Northeast.

Pending home sales fell 1.1% m/m (+20.2% y/y) in October, their second consecutive monthly decline following four monthly increases according to data released by the National Association of Realtors (NAR). The 2.2% m/m drop in September was revised up to a 2.0% decline. The index level slipped to 128.9 (2001=100) in October, still remains well above its COVID-lockdown induced trough of 69.0 in April. Shrinking supply and low interest rates are putting upward pressure on prices which is beginning to restrain some potential buyers, especially first-time buyers.

The October decline was concentrated in the Northeast where pending sales fell 5.9% m/m (+18.5% y/y) after having increased in each of the previous five months. Sales in the Midwest edged down 0.7% m/m (+19.6% y/y) in October on top of a 3.2% m/m drop in September. Sales in the South were essentially unchanged, rising 0.1% m/m (+21.0% y/y) while sales in the West were actually unchanged (+20.8% y/y).

The pending home sales index measures sales at the time the contract for the purchase of 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 leads the level of closed existing home sales by about 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, % chg) Oct Sep Aug Oct Y/Y % 2019 2018 2017
Total -1.1 -2.0 8.8 20.2 1.1 -4.1 -0.8
   Northeast -5.9 2.0 4.3 18.5 0.8 -5.0 0.6
   Midwest -0.7 -3.2 8.6 19.6 -0.3 -4.6 -2.5
   South 0.1 -2.4 8.9 21.0 1.8 -1.9 0.6
   West 0.0 -2.6 12.7 20.8 1.3 -7.3 -2.5
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