The Pending Home Sales Index decreased 2.4% in August, declining for the third time in four months, and falling 0.2% below its level for the same month a year ago. The Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts reported by the National Association of Realtors (NAR), decreased to 108.5 in August from a downwardly revised 111.2 in July.
The PHSI increased 1.3% in the Northeast in August, consistent with the 6.1% increase in existing sales in the Northeast reported last week. But the PHSI decreased in the remaining regions, ranging from 0.9% in the Midwest to 3.2% in the South and 5.3% in the West. Year-over-year, the PHSI was up 5.9% in the Northeast, but fell 0.6% in the West. 1.5% in the South and 1.7% in the Midwest.
NAR attributed the PHSI decline to a lack of inventory. However, builder confidence surged in September along with consumer confidence. Also, August new home sales recorded their second strongest month since the Great Recession. These reports suggest good news for new construction as the housing recovery continues to address demand among first-time buyers and broaden across a wider range of markets during the balance of 2016.