After two months of decline at the beginning of the summer, pending home sales rebounded in August. Every major region in the US grew month to month in contract activity. The PHSI (Pending Home Sales Index) went up to 8.1% in August. So, what does this mean?

What’s the cause of the home sales increase?

Economists and researchers are crediting rising inventory and moderating price conditions for the recent increase in home sales. However, affordability is still an issue since home price gains are roughly three times the wage growth. According to Lawrence Yun, NAR’s chief economist, this kind of imbalance is unsustainable over the long term. “The more moderately priced regions of the South and Midwest are experiencing stronger signing of contracts to buy, which is not surprising,” Yun said. “This can be attributed to some employees who have the flexibility to work from anywhere, as they choose to reside in more affordable places.”

Is the PHSI reliable for tracking home sales?

The PHSI is seen as a leading indicator for the housing sector, but it is based on pending sales of existing homes. A sale is classified as “pending” when a contract is signed, but the transaction is not yet closed. The sale is then usually finalized within one or two months of signing the contract. Pending contacts are a reliable indicator of upcoming sales. However, the length of time between pending contracts and completed sales are not the same for all sales. The length of time varies due to difficulties obtaining financing, inspection problems, or appraisal issues.

If you’re a real estate agent or mortgage broker that’s getting swamped during the rising housing market, let us know. When it comes to any real estate transaction, it helps to have Innovation Title on your side. Give us a call for more information today.