A Historic Rebound for the Housing Market
At the national level, pending home sales increased 44.3% in May, registering the highest month-over-month gain in the index since the National Association of Realtors (NAR) started tracking this metric in January 2001. So, what exactly are pending home sales, and why is this rebound so important?
Pending Home Sales Explained
In real estate, pending home sales is a key indicator in determining the strength of the housing market. It measures how many existing homes went into contract in a specific month, and indicates the movement of both buyers and sellers in the market.
Pending Sales = Housing Rebound
With the COVID-19 pandemic and a shutdown of the economy, we saw a steep two-month decline in the number of houses that went into contract. In May, however, that number increased dramatically (See graph below):
This jump means buyers are back in the market and purchasing homes right now. Lawrence Yun, Chief Economist at NAR mentioned:
“This has been a spectacular recovery for contract signings and goes to show the resiliency of American consumers and their evergreen desire for homeownership…This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”
But in order to continue with this trend, we need more houses for sale on the market. Yun continues to say:
“More listings are continuously appearing as the economy reopens, helping with inventory choices…Still, more home construction is needed to counter the persistent underproduction of homes over the past decade.”
New Construction To Help Inventory
As we move through the year, we’ll see an increase in the number of houses being built. This will help combat a small portion of the inventory deficit. The lack of overall inventory, however, is still a challenge, and it is creating an opportunity for homeowners who are ready to sell. As the graph below shows, during the last 12 months, the supply of homes for sale has been decreasing year-over-year and is not keeping up with the demand from homebuyers.
If you decided not to sell this year due to the health crisis, maybe it’s time to jump back into the market while buyers are actively looking for homes. On the flip side, if you are resuming your home search that was put on pause, we're here to guide you through the process of showings, negotiations, and tackling the pending tasks needed to close. Let’s connect today to determine your best move forward.