This morning the National Association of Realtors released the August data for their Pending Home Sales Index. Here is an excerpt from the latest press release:

Lawrence Yun, NAR chief economist, says that even though we are still seeing year-over-year declines, the latest monthly increase is a good, stabilizing trend. “This shows that buyers are out there on the sidelines, waiting to jump in once more inventory becomes available and the price is right,” he said.

Yun continues to point to the lack of inventory of moderately priced homes and affordability as factors restraining the housing market but when viewed through the lens of the last few decades, the current affordability climate is still favorable. “When compared to the year 2000, when the housing market was considered very healthy and home sales figures were roughly equivalent, the affordability conditions were much lower compared to now. So even though affordability has been falling recently, the demand for housing should remain steady”. (more here).

The chart below gives us a snapshot of the index since 2001. The MoM came in at 0.5%, up from a 1.9% decrease last month. Investing.com had a forecast of -0.1%.

Over this time frame, the US population has grown by 15.8%. For a better look at the underlying trend, here is an overlay with the nominal index and the population-adjusted variant. The focus is pending home sales growth since 2001.

The index for the most recent month is 18% below its all-time high in 2005. The population-adjusted index is 26% off its 2005 high.

Pending versus Existing Home Sales

The NAR explains that “because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing Home Sales by a month or two.” Here is a growth overlay of the two series. The general correlation, as expected, is close. And a close look at the numbers supports the NAR’s assessment that their pending sales series is a leading index.