Housing MarketReal Estate

Homebuyers drawn to cheaper areas in Midwest and South

Contract signings up 8% from July, but still below August 2020 data

Pending home sales rose in August, following two consecutive months of decline, according to the National Association of Realtor’s pending home sales index report released on Wednesday. And homebuyers with flexibility are keen on more moderately priced regions within the Midwest and South, the report found.

Homebuyer contract signings in the U.S. rose 8% month-over-month from July to August, though the figure was still 8.3% lower than the same time last year. The sequential increase caused the NAR Pending Home Sales Index (PHSI) to rise 8.1% to 119.5, its highest level since January 2021.

“Increased inventory of homes for sale, near historic low mortgage rates and favorable demographics means more housing demand,Odeta Kushi, the First American deputy chief economist said in a statement. “This is a strong purchase market and the uptick in inventory is bringing back some buyers who pulled back during peak frenzy.”

Despite increased inventory and still-low mortgage rates, the purchase of a home still is beyond the financial reach of many would-be homebuyers, as home price gains are roughly three times wage growth, according to NAR’s chief economist Lawrence Yun.

“The more moderately priced regions of the South and Midwest are experiencing stronger signing of contracts to buy, which is not surprising,” Yun said in a statement. “This can be attributed to some employees who have the flexibility to work from anywhere, as they choose to reside in more affordable places.”

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Presented by: Finance of America

The homebuyer trend is illustrated in Realtor.com’s latest report on the hottest housing markets in the U.S. Of the 40 largest metros, the metros with the largest year-over-year improvement, as of Sept. 27, were Orlando-Kissimmee-Sanford, Tampa-St. Petersburg-Clearwater, Nashville-Davidson-Murfreesboro-Franklin, Jacksonville, Florida and Austin-Round Rock.

While all regions saw an increase in pending home sales, the Midwest and the South had the largest increases at 10.4% and 8.6%, respectively. Yet despite these increases the pending home sales index is still lower in all regions than it was a year prior.

“Existing sales were relatively steady from March through August at levels lower than the peaks from late 2020,” Nationwide senior economist Ben Ayers said in a statement. “For all of 2021, we expect that existing home sales will be the strongest since 2006 despite widespread tight supply conditions in most local markets.”

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