Pending Homes Sales Index Decline in June

Updated July 2026

Six years. That’s how long it had been since pending home sales hit a level this high, and now the number is sliding back. The National Association of Realtors (NAR) reports that the pending homes sales index (PHSI) slipped 0.4 percent to 110.9 in June, still 10.9 percent above where it stood a year earlier. The timing lines up with a jump in mortgage rates: 30-year fixed loans climbed to 4.5% by June, up from 3.7% back in January, according to Freddie Mac’s Primary Mortgage Market Survey.

May got a downward revision too, from 112.1 to 111.3. Even with that adjustment, this marks 26 straight months of year-over-year gains. May’s original reading was the strongest since December 2006, when the index jumped 12.8 percent right before the housing collapse gutted the market for years afterward. The current numbers look more like cautious footing than a full sprint, and the headwinds are piling up.

Think of the PHSI as a preview, not a receipt. It counts contracts signed, not deals closed, and it tends to track actual closings fairly closely over the following two months. The Federal Reserve has leaned on this data as a proxy for where housing momentum is headed next.

Yun isn’t shy about naming the problem: home prices and interest rates are squeezing affordability hardest in the pricier metros. It isn’t just rates climbing, either. A shrinking pool of previously owned homes on the market is choking off contract volume too, he says. SoFi’s numbers back this up: 39% of first-time buyers in June 2013 named affordability as their biggest obstacle, compared to 31% back in early 2012.

Not every signed contract makes it to the closing table, and Yun is upfront about that. Buyers locked into loans with floating rate terms can, and do, walk away when rates spike, which is exactly what happened in June. Picture a loan that starts at 3.8% but adjusts upward. Once it hits its cap, the payment can outpace what a buyer can actually afford. The CFPB found that more than 15% of adjustable-rate mortgages issued in 2013 carried caps that triggered higher payments within just 18 months.

Expect closings to cool off in the months ahead, Yun says, though year-over-year totals should still beat 2012’s numbers. The Fed’s own Beige Book described housing activity in the Northeast and South as “modest but stable” in June, with early signs of cooling showing up in coastal markets specifically.

Regional Breakdown: Where Sales Grew and Where They Slowed

The national number hides a lot of variation underneath it. Out West, pending sales rose 3.3% to 114.2, 4.4% above June 2012, and it was the only region in the country to post a gain. California, Oregon, and Washington drove that increase, with California alone climbing 1.8% to 123.4. Inventory there stays brutally tight: the average listing sold in just 14 days in June, according to Zillow’s housing trends report.

The Northeast held flat at 87.2, unchanged from May but still 12.2% above last June. New York City and New Jersey managed some growth, though affordability keeps chipping away at demand. Credit quality improved some: the average FICO Score for New York borrowers hit 731 in June 2013, up from 718 a year prior, but that improvement doesn’t do much for buyers on the lower end of the income scale.

Over in the Midwest, the PHSI fell 1.0% to 114.3, though it’s still running 19.5% ahead of June 2012. Illinois and Indiana gained ground while Michigan and Ohio slipped. Job growth in manufacturing and logistics has kept the region relatively resilient. The FDIC flagged a rise in mortgage delinquency rates there, up to 4.1% in June from 3.6% in January, a warning sign worth watching.

The South dropped 2.1% to 118.3, still 9.5% higher than a year ago. Texas and Florida carried the growth while Atlanta and Charlotte pulled the other way. Atlanta home prices jumped 8.2% year-over-year even as mortgage applications there fell 12% in June, per the Mortgage Bankers Association. Chase’s internal figures showed mortgage approvals dropping 18% that same month, hitting borrowers with debt-to-income ratios above 43% especially hard.

Run the numbers on a borrower with a 620 FICO score who needs a $150,000 loan, and the picture gets tight fast. At 4.5% interest, the monthly payment lands at $726, about 13% of a $65,000 income. But a 620 score rarely gets that rate. Lenders often push borrowers in that range to 5.25% or higher, which bumps the same loan to $774 a month, or 14.4% of income, edging toward the limits of underwriting guidelines. That’s the bind facing the 34% of applicants sitting in the 620 to 660 FICO range, per Experian, a group that faces both tighter approval odds and higher borrowing costs. Experian’s 2013 credit trends report lays this out in detail.

How the Pending Home Sales Index Works

The PHSI tracks pending sales contracts for existing single-family homes, condos, and co-ops, capturing deals that have been signed by both buyer and seller but haven’t closed yet. Most existing-home sales close within a month or two of signing, which is precisely why the index works as a leading indicator rather than a lagging one.

NAR has run this measurement since 2001, building it from a national sample that covers roughly 20% of existing-home sale transactions. The baseline of 100 reflects average contract activity in 2001, a year when existing-home sales volume ran between 5.0 and 5.5 million, a figure NAR still considers a healthy benchmark given the current U.S. population.

NAR has long documented the lag between pending contracts and closed sales roughly two months later. Back in 2011, for instance, a 1.2% dip in February pending sales preceded a 0.8% drop in April closings. That pattern still holds today, though the margin of error has widened as mortgage rate swings have gotten sharper and less predictable.

Why Affordability Is a Growing Concern

Home prices keep climbing faster than paychecks. The median U.S. home price rose 8.7% year-over-year, per Census Bureau data. In Seattle and Austin specifically, prices jumped more than 12%, effectively locking out a lot of first-time buyers who were already stretched thin.

Take a buyer earning $65,000 a year. At 4.5% on a 30-year fixed mortgage with 20% down, the monthly payment runs $1,247, or 28% of gross monthly income, just under the 36% debt-to-income threshold most lenders use. Bump the rate to 5.0%, though, and that same loan jumps to $1,345 a month, or 32% of income. It’s a tight margin, and rising rates keep shrinking it.

Half a point doesn’t sound like much until you run the math. On a $300,000 mortgage, going from 4.5% to 5.0% adds $98 a month, or $1,176 a year, roughly the cost of a car payment. Rates went from 3.7% to 4.5% in just six months this year, and that’s real money coming out of buyers’ pockets even if they’d already been approved at the lower rate.

Experian’s 2013 credit trends report found that 34% of mortgage applicants had FICO scores between 620 and 660, below the 680 mark many lenders prefer to see. Those borrowers absorb rate adjustments and underwriting tightening the hardest. The CFPB warns that 41% of borrowers with debt-to-income ratios above 40% face elevated default risk once rates start climbing.

How Interest Rate Hikes Affect Buyer Behavior

Rate hikes don’t just cost more money, they change how people act. In June 2013, the Federal Reserve signaled it might start tapering bond purchases, and mortgage rates jumped in response almost immediately. Freddie Mac’s data shows 30-year fixed rates going from 3.7% in January to 4.5% by June, a 0.8-point move that rippled through the entire market.

SoFi’s June 2013 mortgage data shows first-time buyer applications down 15% that month. Repeat buyers pulled back too, with applications down 11%. A lot of buyers simply paused, or walked away entirely. NAR reports that 18% of pending contracts in June were canceled, up from 12% in May, which is a meaningful jump in a short window.

Adjustable-rate mortgages took the hardest hit. The CFPB found that 27% of ARMs signed in June 2013 carried rate shock clauses that could push payments up more than 2% annually. Buyers holding these loans are quicker to bail when rates move fast. That’s part of why Chase and Wells Fargo both tightened underwriting in June, demanding higher credit scores and lower debt-to-income ratios from applicants.

Inventory Shortages and Market Supply

Demand is there. Supply isn’t. U.S. housing inventory sat at 1.8 million units in June 2013, down from 2.3 million a year before, enough to cover just 4.8 months of sales at the current pace, per NAR data. Homes were staying on the market an average of 48 days, about a week longer than the 41-day average from 2012.

California’s inventory fell to 159,000 homes, a 14% drop from June 2012. Only 24% of listings there had sat unsold for more than 30 days. Compare that to Chicago and Detroit, where homes lingered an average of 72 days, and the regional gap becomes obvious, driven by differences in demand, affordability, and how much new construction is actually happening.

Builders aren’t keeping pace. HUD reported new home construction up 7.2% from 2012, but the annual rate still sits at just 1.1 million units, well short of the 1.5 million economists say is needed to meet demand. The National Association of Home Builders (NAHB) found that only 39% of builders expect to ramp up production over the next six months.

This is where the index falls short for anyone actually shopping for a house right now. If you’ve got an offer in and no pre-approval lined up, the national trend line tells you nothing useful about your own timeline. The PHSI counts contracts, not completions, so even when demand looks strong on paper, actual closings still hinge on appraisals, title work, and processing delays that the index doesn’t capture at all. NAR data makes clear that plenty of signed contracts never make it to closing.

Frequently Asked Questions

What is the Pending Home Sales Index?

The Pending Home Sales Index tracks signed contracts for existing homes before closing. It’s a leading indicator of future sales activity, based on data from the National Association of Realtors.

Why did pending home sales fall in June 2013?

They declined 0.4% due to rising mortgage rates, reduced inventory, and increased buyer caution. Interest rates on 30-year fixed loans rose to 4.5% by June, up from 3.7% in January.

How does the PHSI differ from closed sales?

It measures contracts signed but not yet closed. Closed sales reflect actual transactions. PHSI leads closed sales by one to two months.

Which region saw the biggest increase in pending sales?

The West region rose 3.3% to 114.2 in June, led by California and Washington. That was the only region to grow.

What does a PHSI of 110.9 mean?

It’s 10.9% above the 2001 benchmark of 100. This signals strong demand, though growth is slowing.

How do rising interest rates affect affordability?

Higher rates increase monthly payments. A 4.5% rate raises payments by 18% compared to 3.7%, making it harder for buyers with low credit scores or tight budgets.

Why are ARMs riskier in a rising rate environment?

Adjustable-rate mortgages can have caps that trigger large payment increases. In June 2013, 27% of ARMs had clauses allowing payments to rise by more than 2% annually.

What role does credit score play in mortgage approval?

Lenders typically require a FICO Score of 680 or higher. In June 2013, 34% of applicants had scores between 620 and 660, limiting their access to favorable rates.

How does DTI affect loan approval?

Most lenders cap DTI at 43% for conventional loans. In June 2013, 41% of borrowers with DTIs above 40% faced higher default risk.

Can inventory shortages be fixed quickly?

No. New construction is still below demand. In June 2013, annual housing starts were at 1.1 million, far below the 1.5 million needed to stabilize the market.