After hitting a nearly two-year high last month, pending home sales fell slightly but remained solid in October.
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 declined 1.7% from 108.6 in September to 106.7 in October. However, sales were still 4.4% higher than a year ago, the highest year-over-year gain since 2016.
Regionally, only the Northeast saw an increase in the PHSI. The PHSI in the Northeast climbed 1.9% in October, while sales in the Midwest, South and West fell 2.7%, 1.7% and 3.4%. Year-over-year, the PHSI grew in all four regions, ranging from 1.8% in the Midwest to 7.5% in the West.
According to the NAR, this month’s decline was due to the decline in inventory and a small rise in mortgage rates. Despite a drop in contract activity, the overall economic environment remains favorable for housing. As mortgage rates below 4% are very attractive to homebuyers and lack of inventory is preventing home sales growth potential, more new home building is needed to meet housing demand.