Pending home sales of existing homes jumped by 8.1% in August from the previous month, suggesting that buyers in the housing market are making a strong comeback.
The National Association of Realtors said the surprising gain occurred as buyers are seeing more inventory and slightly more favorable prices. It had expected pending home sales to increase by a single percentage point only.
The increase of so-called pending sales, which are signed contracts to buy an existing home within the next two months, came after two months of declines, the NAR said. However, it noted that sales were down 8.3% compared to August 2020, a time when home sales soared at the height of the COVID-19 pandemic.
NAR Chief Economist Lawrence Yun said rising inventory and moderating price conditions are bringing buyers back to the housing market. But he said affordability remains challenging for many buyers as home price gains in the last year are roughly three-times wage growth.
In July, the the latest S&P Case-Shiller home price index reported that home prices were up almost 20% nationally compared to the same month one year before, based on a three-month average going back to May 2021. For its part, the NAR said the median existing-home sales price rose to $356,700 in August, up 14.9% from one year before.
Lately, real estate agents have been reporting an increase in housing supply that has resulted in fewer bidding wars taking place and a slowdown in price gains.
The least expensive regions of the U.S., namely the Midwest and the South, saw the biggest pending sale increases, which housing industry analysts say reflects how the shift to remote work has given some people the opportunity to relocate to areas where housing is cheaper.
Yun said it was “not surprising” that moderately priced regions in the Midwest and the South are seeing more contact signings. “This can be attributed to some employees who have the flexibility to work from anywhere, as they choose to reside in more affordable places,” Yun said.
Pending sales in the Midwest rose by 10.4% on a month-to-month basis but were down 5.9% from August 2020. In the South, pending sales were up 8.6% from the previous month and down 6.3% from a year ago.
More expensive regions such as the West and the Northeast also saw an increase in sales activity. In the West, pending sales jumped 7.2% monthly, but declined 9.2% on an annual basis. In the Northeast, contract signings rose 8.6% from the month prior, and dropped 6.3% on a yearly basis.
The pending sales growth across the U.S. comes in light of last week’s study of home buyers by Zillow, which found that the average buyer has had to submit just two bids on a home before having an offer accepted. It suggests that for all the stories of buyers facing multiple bidding wars and using risky strategies to land a home, most are still able to buy homes without too much difficulty.