Pending Home Sales Index (PHSI) Inches Higher in July

The Pending Home Sales Index (PHSI), a gauge from the National Association of Realtors, reported contracts to buy previously-owned homes rose 1.3% in July. That’s higher than the 0.6% rise economists expected.

“Amidst tight inventory conditions that have lingered the entire summer, contract activity last month was able to pick up at least modestly in a majority of areas,” Lawrence Yun, chief NAR economist said. “More home shoppers having success is good news for the housing market heading into the fall, but buyers still have few choices and little time before deciding to make an offer on a home available for sale. There’s little doubt there’d be more sales activity right now if there were more affordable listings on the market.”

The forward-looking economic indicator based on contract signings rose from a downwardly revised 109.9 in June and is now 1.4% higher than it was in July 2015 (109.8). The index is now at its second highest reading this year after April (115.0).

Regionally, the PHSI in the Northeast inched up 0.8% to 96.8 in July, and is now 1.1% above a year ago. In the Midwest, the index fell 2.9% to 105.8 in July, and is now 1.1% lower than July 2015. Meanwhile, in Pending home sales in the South ticked up 0.8% to 123.9 in July and now are 0.4% above last July. The index in the West gained 7.3% in July to 108.7 and is 6.2% higher on a year-over-year basis.

“The index in the West last month was the highest in over three years 1 largely because of stronger labor market conditions,” Mr. Yun added. “If homebuilding increases in the region to tame price growth and alleviate the ongoing affordability concerns, the healthy rate of job gains should support more sales.”