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The Most Important Report in Real Estate?

The Most Important Report in Real Estate?

Many people report on the National Association of Realtors’ (NAR) Existing Home Sales Report which quantifies the number of closed sales of single-family homes, townhomes, condominiums and co-ops. However, there is another report that NAR releases each month that may be even more important – the Pending Home Sales Report which reveals the current Pending Home Sales Index.

According to NAR, the Pending Home Sales Index (PHSI) is

“a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.”

The PHSI generally leads Existing Home Sales by a month or two and therefore is a more current pulse on home sales.

How is the PHSI calculated?

According to NAR:

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population”.

What does the PHSI look like right now?

The most recent report showed that the PHSI climbed 3.3 percent to 105.9 in July from 102.5 in June. The index is at its highest level since August 2013 (107.1) and is above 100 – considered an average level of contract activity – for the third consecutive month.

Looking at the PHSI at a regional level, we can see the comparative strength of each market.

NAR-NortheastNORTHEAST

This region includes the states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont.

The PHSI in the Northeast jumped 6.2 percent to 89.2 in July, and is 8.3 percent above a year ago.

NAR-MidwestMIDWEST

This region includes the states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Ohio, North Dakota, Nebraska, South Dakota, and Wisconsin.

The PHSI in the Midwest fell 0.4 percent to 104.6 in July, and is 6.4 percent below a year ago.

NAR-SouthSOUTH

This region includes the states of Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia.

The PHSI in the South increased 4.2 percent to 119.0 in July, and is 1.0 percent below a year ago.

NAR-WestWEST

This region includes the states of Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.

The PHSI in the West increased 4.0 percent to 99.5 in July, and is 6.0 percent below a year ago.

Bottom Line

There can be an argument made that the Pending Home Sales Report is actually the most important report released each month because of its timeliness and its measurement of an historically healthy market.

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5 replies
  1. Mr. Krispy
    Mr. Krispy says:

    I agree that a Pending Home Sales Report is a better indicator of the CURRENT market since they are 30 days newer than CLOSED sales data. I’m not too interested in National or even regional data since local activity/data are the world we list/sell in. If your local Board of Realtors or DB isn’t compiling this data for you then you should start lobbying to get it…or you can pull that data out of your MLS program yourself if necessary. IE: When you see INVENTORY increasing, AVERAGE SALES PRICE decreasing, and SALES PENDING decreasing you have an instant picture of the current health of your market place. You can look at the data compared to last month, last quarter, and last year to further clarify normal seasonal fluctuations for your area. Now you have information that makes your discussions with your clients much less emotional, and far more professional…which, of course, leads to more referrals and repeat clients.

    Reply
    • Steve Harney
      Steve Harney says:

      Hi Fred,

      The Northeast and Midwest got hit with VERY extreme weather this past winter which had a heavy impact on the market. They are still recovering from a delayed start to the year.

      The West suffered from a lack of inventory for most of the year.

      The South didn’t deal with either of those issues to the same degree as the rest of the country.

      Those are my thoughts on the question.

      Hope that helps!
      Steve

      Reply
  2. Susanna
    Susanna says:

    The year 2001 we saw the 9/11 airplane hijackings had a significant drop in home sales after 9/11 in the northeast. How much was the rest of the country affected, and foes that mess up the stats for the bar year used as a comparison?
    I noticed that the stats you have now show the northeast under 100, but moving up, while the rest of the country is over 100 but moving down from last year. Besides the weather, what other large event impacts these numbers?

    Reply
    • The KCM Crew
      The KCM Crew says:

      In the Northeast it actually has taken longer to clear out foreclosure inventory due to the majority of the states in that region being judicial states. Now that the foreclosure inventory is clearing out the region can recover just as the rest of the country has.

      Reply

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