Definition
The Pending Home Sales Index (PHSI)® is a real estate indicator produced by the National Association of Realtors® (NAR). The index reflects the trend in sales contracts for residential properties, which include single-family homes, condominiums, and cooperatives. The PHSI is released monthly and annually, with the monthly figures available in both seasonally adjusted and unadjusted forms. The index serves as a leading gauge for actual closed home sales, providing insights into the direction of the housing market.
Key Points:
- Data Source: National Association of Realtors® (NAR)
- Frequency: Monthly and annually
- Adjustment: Available as seasonally adjusted and unadjusted
- Geographic Coverage: The U.S. and four regional breakdowns (Northeast, Midwest, South, and West)
- Importance: Acts as a leading indicator of closed home sales and general market trends
Examples
- Annual Index Example: The Pending Home Sales Index for 2015 was 108.9. Compared with the 2014 index value of 100.8, this signifies an 8% rise in sales contracts.
- Monthly Tracking: Suppose the Pending Home Sales Index for June 2023 in the Northeast region shows a seasonally adjusted value of 90.5. Compared to May 2023, which had an index of 88.0, the region experienced a 2.84% increase in signed contracts.
- Annual Trends: The 2022 annual PHSI was recorded at 105.2, according to NAR, showing a slight decrease from the 2021 value of 107.0, indicating a marginally slower rate of home buying activity.
Frequently Asked Questions (FAQs)
What is the PHSI used for?
The PHSI is used to predict future real estate market activity by evaluating the volume of newly signed home sales contracts. It provides a forward-looking indicator that helps predict the housing market direction, investor decisions, and overall economic health.
How is the PHSI calculated?
The index is calculated based on a large sample covering approximately 20% of transactions for existing-home sales at its earliest date — the signing of a contract. The base year of the index is 2001, and an index value of 100 corresponds to the level of contract activity during that year.
Why are there seasonal adjustments in the index?
Seasonal adjustments are used to account for recurring variations in housing activity due to seasonal factors such as weather changes, holidays, and the school calendar. This allows for a more accurate month-to-month comparison.
Are there separate series for different U.S. regions?
Yes, the PHSI is compiled for four major regions in the United States: the Northeast, Midwest, South, and West, to account for regional differences in the housing market.
How often is the Index published?
The Pending Home Sales Index is published on a monthly basis, with annual aggregations also available.
Related Terms
- Closed Sales: Transactions where a home sale process has been completed, involving the transfer of ownership from seller to buyer.
- Existing Home Sales: A metric that tracks the sale of previously owned houses, condos, and co-ops, providing an overall view of the housing market’s health.
- Housing Market Index (HMI): An economic indicator that ranges from 0 to 100, gauging the overall sentiment and outlook for the single-family housing market.
- Contract Signings: Refers to the legal signing of a sales contract between a buyer and a seller of a property, a commitment that proceeds to closing.
Online Resources
References
- National Association of Realtors®. “Pending Home Sales Index Methodology.” Accessed 2023. NAR Resource
- U.S. Census Bureau. “Housing Vacancies and Homeownership Data (CPS/HVS).” Census Bureau
Suggested Books for Further Studies
- The Real Book of Real Estate: Real Experts. Real Stories. Real Life by Robert Kiyosaki
- Principles of Real Estate Practice by Stephen Mettling and David Cusic
- Your First Home: The Proven Path to Home Ownership by Gary Keller
- Real Estate Investing For Dummies by Eric Tyson and Robert S. Griswold
- Real Estate Market Analysis: Methods and Case Studies by John M. Clapp
