After reaching a record high in August, pending home sales slid for the fifth consecutive month, as surging home prices and low inventory constrain buyers.
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 fell 2.8% from 126.4 in December to 122.8 in January, a six-month low but the highest level for January. However, on a year-over-year basis, sales were still 13.0% higher than a year ago.
Regionally, South was the only region to experience an increase in January, with a 0.1% gain. The PHSI in the Northeast, Midwest and South declined 7.4%, 0.9% and 7.8% respectively. On a year-over-year basis, all four regions saw year-over-year growth, ranging from 8.6% in the Midwest to 17.1% in the South.
Despite the declines in recent months, housing demand remains strong due to low mortgage rates and increased buyer interest in low-density areas. Meanwhile, single-family starts have increased for eight straight months in 2020, which could help to ease some of the supply-demand imbalance. However, housing production softened in January as rising lumber prices continue to affect the housing industry.