After reaching a record high last month, pending home sales cooled in September, ending four straight months of gains.
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 fell 2.2% from 132.9 in August to 130.0 in September, the second highest level on record. However, on a year-over-year basis, sales were still 20.5% higher than a year ago.
Regionally, the Northeast was the only region posting monthly gains in pending sales (2.0%). The PHSI in the Midwest, South and the West declined 3.2%, 3.0% and 2.6% in September. On a year-over-year basis, all four regions saw double-digit year-over-year growths, ranging from 18.5% in the Midwest to 27.7% in the Northeast.
Despite the minor decline in September, housing demand remains strong due to low mortgage rates and a continuing job recovery. Sales are expected to continue growing in the near future. However, low home inventory and rising home prices may put homeownership out of reach for some buyers. More listings and home construction are needed to meet this rising demand.