As record-low mortgage rates continue to fuel housing demand, pending home sales increased for a fourth straight month in August.
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 8.8% from 122.1 in July to 132.8 in August, the highest level on record. On a year-over-year basis, sales were 24.2% higher than a year ago.
All four regions saw an increase in month-over-month contract activity, ranging from 4.3% in the Northeast to 13.1% in the West. On a year-over-year basis, PHSI rose in all four regions as well, with the Northeast seeing the largest gain (26.0%), a second straight month which PHSI saw double-digit year-over-year growth in all four regions.
The V-shape sales recovery suggests that the housing market is leading a post-COVID economic recovery. Though both existing home sales and new home sales continue to hit new record high this month, home inventory remains lean and home prices continued to grow in July. This may put homeownership out of reach for some buyers. More listings and home construction are needed to meet this rising demand.