Given the positive turnaround in home sales in recent weeks, NAR has revised its overall forecast for the year. Read more from NAR’s latest housing report.
Pending home sales continued to escalate in June, the second consecutive month of increases—and all in the midst of the COVID-19 pandemic. The National Association of REALTORS®’ Pending Home Sales Index showed that each of the four major regions of the U.S. saw an increase in month-over-month contract signings as home buyers rushed out to purchase homes across the country.
Contract signings are up 6.3% compared to a year ago, NAR’s index shows.
“It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” says Lawrence Yun, NAR’s chief economist. “Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.”
NAR’s Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, jumped 16.6% month over month in June to a reading of 116.1. (An index of 100 is equal to the level of contract activity in 2001.)
All major regions of the U.S. except the Northeast also recorded year-over-year increases in contract signings. Pending home sales in the South were up 10.3% over year-ago levels; the Midwest up by 5.1% annually; and the West was up by 4.7% in June, NAR reports. Contract signings in the Northeast are down just 0.9% annually, but pending home sales there surged 54.4% in June month over month.
“The Northeast’s strong bounce back comes after a lengthier lockdown, while the South has consistently outperformed the rest of the country,” Yun says. “These remarkable rebounds speak to exceptionally high buyer demand.”
Yun says house hunters during the pandemic appear to be searching for homes away from larger cities, favoring the suburbs. The metros with suburbs that most recently have seen the highest increases in attention from home buyers include Columbia, S.C.; Little Rock, Ark.; Greensboro, N.C.; Tulsa, Okla.; and Cape Coral, Fla., according to realtor®.
Upbeat Forecasts for 2020 and Beyond
Given the turnaround in contract signings in recent weeks, NAR has adjusted its overall housing forecast for this year. For 2020, NAR is now projecting existing-home sales to decline by only 3%, with sales increasing to 5.6 million by the fourth quarter. New-home sales are projected to increase by 3% this year.
Yun is optimistic that positive GDP growth of 4% in 2021 will propel both existing- and new-home sales. He forecasts existing-home sales to grow by 7% in 2021 and new-home sales to increase by 16%.
Home prices are also expected to continue to rise. Home prices are forecast to appreciate 4% in 2020, Yun says. He predicts prices will moderate in 2021 but still increase by 3% as more supply is expected to hit the market.
Low financing costs are expected to continue to entice home buyers. NAR predicts that mortgage rates will stay at or near 3% over the next 18 months.