WASHINGTON (November 30, 2023) – Pending home sales dropped 1.5% in October, according to the National Association of REALTORS®. The Northeast posted a monthly gain in transactions while the Midwest, South and West all recorded losses. All four U.S. regions noted year-over-year declines in transactions.
The Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – dropped 1.5% to 71.4 in October, the lowest number since the index was originated in 2001. Year over year, pending transactions declined 8.5%. An index of 100 is equal to the level of contract activity in 2001.
"During October, mortgage rates were at their highest, and contract signings for existing homes were at their lowest in more than 20 years," said Lawrence Yun, NAR chief economist. "Recent weeks' successive declines in mortgage rates will help qualify more home buyers, but limited housing inventory is significantly preventing housing demand from fully being satisfied. Multiple offers, of course, yield only one winner, with the rest left to continue their search."
Pending Home Sales Regional Breakdown
The Northeast PHSI jumped 2.7% from last month to 64.8, although representing a loss of 6.5% from October 2022. The Midwest index contracted 0.4% to 73.8 in October, down 10.3% from one year ago.
The South PHSI decreased 1.9% to 85.6 in October, declining 7.1% from the prior year. The West index fell 6.0% in October to 51.8, dipping 10.8% from October 2022.
"Home sales are rising in places where more inventory is available," Yun added. "Sales for properties priced above $750,000 were higher than a year ago, because there is more inventory at this price point than what we saw last October. Additionally, newly built home sales are up 4.5% year-to-date due to homebuilders' ability to create more inventory.1 It is vital that we continue to focus on boosting housing supply by all means in all corners of the country over the coming months."
About the National Association of REALTORS®
The National Association of REALTORS® is America's largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics.
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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.
The index is based on a sample that covers about 40% of multiple listing service data each month. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
NOTE: Existing-Home Sales for November will be reported December 20. The next Pending Home Sales Index will be released December 28. All release times are 10 a.m. Eastern. View the NAR Statistical News Release Schedule.
1 U.S. Census Bureau and the U.S. Department of Housing and Urban Development. (2023, November 27). New Residential Sales, November 27, 2023. Retrieved from United States Census Bureau: https://www.census.gov/construction/nrs/pdf/newressales.pdf(link is external)