Benefitting from lower mortgage rates, pending home sales increased for the second straight month in September.
The Pending Home Sales Index (PHSI), reported by the National Association of Realtors (NAR), is a forward-looking indicator based on signed contracts. The PHSI rose 1.5% from 107.1 in August to 108.7 in September, highest level since December 2017. On a year-over-year basis, sales were 3.9% higher than a year ago.
The September PHSI were mixed regionally. The measure was 3.1% and 2.6% higher in the Midwest and South, but fell 0.4% and 1.3% in the Northeast and West. Year-over-year, the PHSI grew in all four major regions, ranging from an increase of 1.3% in the Northeast to 5.7% in the South.
Two consecutive gains in sales suggest the housing market continues to get a lift from lower mortgage rates even though home prices outpace income growth. According to NAR, national buying power has increased by 6% because of improved interest rates. As a sizeable mortgage rates drop is not expected, insufficient inventory will be a headwind for housing since it continues to drive up home prices.