The National Association of Realtors’ Pending Home Sales Index dropped 2.2 percent, to 130, in September after four consecutive months of contract activity growth. The news comes on the heels of August’s pending-home sales data, which showed a strong 8.8 percent increase in the index month-over-month.
Overall year-over-year contract signings, however, increased 20.5 percent. A pending sales index of 100 represents the level of contract activity present in 2001.
Although all four regions saw annual increases in pending home sales, the Northeast was the only region that saw month-over-month gains in September, with growth of 2 percent, to 119.4, which was up by 27.7 percent from one year ago.
“The demand for homebuying remains super strong, even with a slight monthly pullback in September, and we’re still likely to end the year with more homes sold overall in 2020 than in 2019,” NAR Chief Economist Lawrence Yun said in a statement. “With persistent low mortgage rates and some degree of a continuing jobs recovery, more contract signings are expected in the near future.”
Credit: National Association of Realtors
Still, although demand remains relatively strong, the decline in home sales may be signaling the beginning of a seasonal slowdown, which in any other year, would have taken place much earlier in the fall.
“September contract signings pointed to a seasonal slowdown, with an unexpected 2.2 percent decline over August, because many buyers struggled with steeply rising prices and shrinking inventory of homes for sale,” Realtor.com Senior Economist George Ratiu said in a statement. “The Midwest and South posted the sharpest monthly drops.”
The Midwest index dropped 3.2 percent month-over-month to 120.5, up 18.5 percent from the year before.
In the South, pending-home sales declined 3 percent to an index of 150.1, which was up 19.6 percent from September 2019.
The West’s index decreased 2.6 percent, to 116.8, up 19.3 percent from the year before.
As the coronavirus pandemic continues, Yun said more buyers will undoubtedly continue to enter the market as they find new needs for their home during quarantine.
“Additionally, a second-order demand will steadily arise as homeowners who had not considered moving before the pandemic begin to enter the market,” Yun said. “A number of these owners are contemplating moving into larger homes in less densely populated areas in light of new-found work-from-home flexibility.”
