U.S. Pending Home Sales Slump in August
Summary
- PHSI -7.1% (-18.7% y/y) in August; first m/m decline since May.
- Lowest index level since April 2020.
- Widespread m/m drops in all the major regions, w/ double-digit y/y falling rates.
- With mortgage rates rising above 7%, home-buying activity will likely continue to slow.
The Pending Home Sales Index, a forward-looking measure of home sales based on contract signings, fell 7.1% m/m (-18.7% y/y) to 71.8 in August after rises of 0.5% in July (+0.9% initially) and 0.4% in June (unrevised), according to the National Association of Realtors (NAR). The August m/m fall was the first in three months and the deepest since September, with the PHSI at the lowest level since April 2020 (also 71.8). The year-on-year rate of decline deepened to -18.7% in August, the worst since May, from -14.3% in July. The PHSI has fallen 43.9% since its August 2020 high of 128.0.
The slump in sales occurred as the average rate on a 30-year mortgage rose to 7.07% in August from 6.84% in July. That was the highest monthly average since 7.07% in March 2002. Notably, the 30-year mortgage rate increased to 7.19% in the September 21 week, a four-week high, from 7.18% in the September 14 week.
Pending home sales decreased in August in all the major regions in the country. Sales in the South tumbled 9.1% (-17.6% y/y) in August after a 1.9% rebound in July, registering the fourth m/m decline in five months and the deepest since April 2020. Sales in the West slid 7.7% (-21.4% y/y) following a 5.7% July gain and sales in the Midwest fell 7.0% (-19.1% y/y) after a 1.4% July drop, posting the third m/m slide in four months and the worst since March. Sales in the Northeast declined 0.9% (-18.2% y/y) following a 5.8% July drop and two consecutive m/m increases.
The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar 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, which is usually a couple of months after the sales contract has been signed. 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 are available in Haver's PREALTOR database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the SURVEYW database.
Winnie Tapasanun
AuthorMore in Author Profile »Winnie Tapasanun has been working for Haver Analytics since 2013. She has ~20 years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations. Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia. Winnie is bilingual in English and Thai with competency in French. She loves to travel (~30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.
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