As record-low mortgage rates continue to fuel housing demand, pending home sales increased for a third straight month in July.
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 5.9% from 115.3 in June to 122.1 in July. On a year-over-year basis, sales were 15.5% higher than a year ago, the largest gain since early 2014.
All four regions saw an increase in month-over-month contract activity, ranging from 0.9% in the South to 25.2% in the Northeast. On a year-over-year basis, PHSI grew in all four regions as well, with the Northeast seeing the largest gain (20.6%).
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 hit new record high this month, home inventory remains lean and home prices continued to grow in June. This may put homeownership out of reach for some buyers. More listings and home construction are needed to meet this rising demand.