The National Association of Realtors released encouraging news Thursday about the future of the housing market. The trade group reported that pending home sales – that is homes where a buyer signed a contract, but the sale has not closed – rose 1.9 % index points to 111.3 in March, after two consecutive months of decline.
Though homes in contract are not always closed, the index figure is a strong indication that home sales will rebound in the coming months after an inventory-induced decline.
What is this index? The 111.3 relates to a baseline of 100 that the NAR put together in 2001. “By coincidence,” the NAR explained, “The volume of existing homes sales in 2001 fell within the range of 5 to 5.5 million, which is considered normal for the current U.S. population.”
An index based on 2001 figures shows historic shifts in population. In the South, the pending home sales index is 137.2. But in the Northeast, Midwest, and West the figure is a few points less than 100.
NAR chief economist Lawrence Yun voiced optimism in his statements accompanying the pending home sales report, stating that supply will soon come closer to meeting high housing demand.
“Low inventory has been a constant problem, but more inventory will show up as new home construction intensifies in the coming months, as well as from a steady wind-down of the mortgage forbearance program,” Yun said. “Although those moves won’t immediately replenish supply they will be a step forward.”
New residential construction building permits in the U.S. incrementally climbed to 1.76 million in March, according to the U.S. Census Bureau, continuing the recent increase in housing starts.
Mortgage forbearance is a touchier subject.
A Joe Biden administration executive order extended the pandemic-induced homeowner foreclosure moratorium until June 30, and also extended the forbearance enrollment window until that time. And the Consumer Finance Protection Bureau proposed extending the moratorium until 2022.