Homes Are Going Under Contract in Record Time
August 27, 2020
Contract signings posted another big jump in July, the National Association of REALTORS® reported Thursday. This marks three consecutive months of growth as markets continue to roar back after facing initial closures from the COVID-19 outbreak this spring.
Pending home sales are now up 15.5% year over year. Each of the four major regions of the U.S. saw increases in pending home sales, both month over month and annually. And NAR Chief Economist Lawrence Yun said there are no indications that contract activity will wane anytime soon, particularly in the suburbs.
“We are witnessing a true V-shaped sales recovery as home buyers continue their strong return to the housing market,” says Yun. “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”
NAR’s Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, increased 5.9% in July over June’s numbers. The index reached a reading of 122.1 in July. (A reading of 100 on the index is equal to the level of contract activity in 2001.)
With nearly all states now at least partially reopened since the start of the COVID-19 pandemic, the housing market is facing a “robust activity from pent-up demand,” according to NAR’s index. Pending home sale increases were led in July by a 20.6% year-over-year uptick in the Northeast, followed by a 15.4% annual increase in Midwest, 14.9% annual increase in the South, and a 13.2% increase in the West.
Yun forecasts existing-home sales to reach 5.4 million this year, a 1.1% increase over 2019. By 2021, he predicts existing-home sales to reach 5.86 million, buoyed by an expanding economy and continued low interest rates. The 30-year fixed-rate mortgage is expected to remain low next year, averaging 3.2% in 2021. Yun also expects housing starts to grow, averaging 1.35 million in 2020 and increase to 1.43 million in 2021.
“Anecdotally, REALTORS® are telling me there is no shortage of clients or home seekers, but that scarce inventory remains a problem,” Yun says. “If 20 percent more homes were on the market, we would have 20 percent more sales, because demand is that high.”
Updated: October 23, 2020