BAM’s Key Details:
- Pending home sales for October dropped for the fifth straight month
- The Pending Home Sales Index (PHSI) dropped to 77.1—down 4.6% from September
- Year-over-year, pending sales dropped by 37.0%
According to the National Association of REALTORS® (NAR), pending home sales for October 2022 dropped for the fifth consecutive month—falling 4.6% to a Pending Home Sales Index (PHSI) of 77.1. Compared to one year ago, the PHSI dropped by 37.0%
Month-over-month, contract signings dropped in three out of four major U.S. regions, with only the Midwest seeing an increase. Year-over-year, pending sales decreased in all four regions.
The Pending Home Sales Index (PHSI)
NAR developed the Pending Home Sales Index (PHSI) in 2001 as an indicator of pending home sales based on contract signings.
The PHSI is a leading indicator for the real estate industry, based on pending sales of existing homes—i.e., sales that haven’t yet closed but for which a contract has been signed. Typically, these sales are finalized within one or two months of signing.
A PHSI of 100 is equivalent to the average level of pending sales during 2001—the first year this metric was officially examined.
The volume of existing-home sales in that year fell between 5.0 to 5.5 million, which NAR considers a normal range of contract activity for the current U.S. population.
PHSI Regional Breakdown
The PHSI takes into account regional contract activity as well as national, and October’s results show month-over-month drops in the index for all but one of the four major U.S. regions, and year-over-year drops for all four:
- The Northeast PHSI dropped 4.3% from last month to 68.7—down 29.5% from October 2021
- The South index dropped 6.4% month-over-month to 90.6—down 38.2% from one year ago
- The West index dropped 11.3% month-over-month to 55.6—down 46.2% from the prior year.
- The Midwest index increased 3.3% month-over-month to 83.5—but dropped 32.1% year over year
October was a difficult month for home buyers as they faced 20-year-high mortgage rates. The West region, in particular, suffered from the combination of high interest rates and expensive home prices. Only the Midwest squeaked out a gain.
The upcoming months should see a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November.
Top takeaways for real estate agents
As a real estate professional, your clients and community count on you to educate yourself on industry news and trends—and to readily and capably communicate what you learn with as many people as possible in your local market.
Be the agent who knows what’s going on in the industry, nationally as well as locally, and who can help your clients make sense of the current market, so they can see their advantages and make the most of them.