- The National Association of Realtors’ pending home sales index jumped 8.8% last month to an all-time high of 132.8, indicating that the recovery in the US real estate market has continued in the fall.
- Economists polled by Bloomberg were expecting a 3.1% increase.
- The reading is the index’s fourth consecutive climb. All four of America’s major regions saw growth in August, with the West showing the greatest improvement.
- The pace of home sales exploded throughout the summer as Americans took advantage of record mortgage rates. The sector has served as a rare bright spot in an economy plagued by a pandemic.
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Record mortgage rates pushed home sales contracts up in August as the US housing boom showed no signs of stopping.
The National Association of Realtors’ pending home sales index climbed 8.8% last month to a record 132.8, according to data released Wednesday. The reading marks a fourth consecutive monthly increase for the index, and all four of the major US regions have shown growth through the end of the summer.
Economists polled by Bloomberg had expected a jump of 3.1%.
Growth from July to August was strongest in the West, with future sales in the region increasing 13.1%. Nationwide contract signatures jumped 24.2% year-over-year, NAR added.
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“Extremely low mortgage rates again contributed to the surge in ongoing home sales in August,” Lawrence Yun, chief economist of NAR, said in a statement.
He continued, “While I really expected the housing industry to be stable during the pandemic-induced economic shutdowns, I am pleasantly surprised to see the industry rebound so strongly and so quickly.
The hot streak also enjoys strong support from the Federal Reserve for the foreseeable future. The central bank signaled in mid-September that near zero interest rates will last until 2023. Such an accommodative policy and its effect on mortgage rates “will undoubtedly help homebuyers to keep entering. in the market, ”Yun said.
The country’s housing market has served as a rare bright spot throughout the coronavirus pandemic. The introduction of historically low interest rates in March caused a rapid rebound after an initial collapse. Sales of existing and new units continue to increase even though other indicators point to a slowing economic recovery in the United States.
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Still, the trend may be on its last legs. If the pace of new home sales does not slow, supply will run out in just 3.3 months, according to the Census Bureau. This is the smallest data window dating back to 1963.
The imbalance between supply and demand is already pushing up prices. The S&P CoreLogic Case-Shiller Index, which tracks home values in 20 US cities, climbed 3.9% in July, according to data released Tuesday. The reading topped economists’ estimate of 3.6% growth and marked the biggest year-over-year jump since December 2018.
To be sure, record pending home sales are not guaranteed to generate such robust sales. Not all contracts lead to closings and variations in sample sizes can skew the final reading, Yun said. Still, the trend suggests that supply will be nearing depletion before the market rally cools.
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