BAM Key Details:

  • According to the National Association of REALTORS, pending home sales for February 2023 are up for the third consecutive month, rising 0.8% to 83.2%
  • Three regions of the U.S. posted monthly gains, while the West declined. 
  • An index of 100 is equal to the level of sales contract activity in 2001, when NAR began tracking the data. 

The National Association of REALTORS® (NAR) announced a third monthly increase in its report on February pending sales, raising the Pending Home Sales Index (PHSI) by 0.8% to 83.2%. 

Three U.S. regions—the South, Midwest, and Northeast—all posted monthly gains while the West declined. Pending sales for all four regions registered year-over-year drops, with an overall decline of 21.1%.

The PHSI is based on contract signings, which typically precede a closing by one to two months. Though the duration can vary widely, signings are generally a good early indicator of an eventual sale closing. 

After nearly a year, the housing sector’s contraction is coming to an end. Existing-home sales, pending contracts and new-home construction pending contracts have turned the corner and climbed for the past three months.

Lawrence Yun

NAR Chief Economist

The South and Midwest are leading the recovery

The Northeast PHSI rose 6.5% from the previous month to 72.5%, a 17% drop from one year ago. The Midwest index rose 0.4% to 84.9% in February, dropping 16.5% from February 2022. 

The South PHSI rose 0.7% to 99.3% in February, declining year over year by 21.7%. And the West index dropped 2.4% in February to 64.6%, falling 28.4% from one year ago. 

The affordable U.S. regions—the Midwest and South—are leading the recovery. Mortgage rates have improved in recent weeks after the federal government guaranteed the status of most mortgages amidst uncertainty in the financial market. While access to commercial mortgage loans could become increasingly difficult, residential mortgage loans are expected to be more readily available.

Lawrence Yun

NAR Chief Economist

The Pending Home Sales Index

As a leading indicator for housing, the Pending Home Sales Index (PHSI) is based on a sample that represents about 40% of MLS data each month. 

Sales are considered pending when the contract has been signed but the sale hasn’t yet closed. The level of monthly sales-contract signing parallels the level of existing-home sales closings in the following two months. 

While some sales fall through, for one reason or another (e.g., the buyer is suddenly unable to qualify for a mortgage loan), pending contracts are considered good early indicators of future sales closings. Just how imminent those closings are depends on a number of factors, including the buyer’s ability to purchase the home and the results of a home inspection. 

A PHSI of 100 is equal to the average level of sales contract activity in 2001, which was the year NAR began tracking this data. By coincidence, sales contract volume in that year fell within the range considered normal for the current U.S. population (5.0 to 5.5 million).

NAR will report existing-home sales for March on April 20, 2023. The next Pending Home Sales Index report will go out on April 27, 2023. Release times for both are 10 am Eastern. 

To learn more, check out the NAR Statistical News Release Schedule

Top takeaways for real estate agents

Sellers in your market are likely to be interested in any news related to pending home sales. For some, it’s FOMO, while for others it’s simply an indicator that more sellers are succeeding in getting their homes under contract. Keep this information handy, along with data on bidding wars and offers over the asking price, as well as on price cuts. 

Give your sellers the full picture of what’s going on. And do the same for your buyers.