Pending Home Sales Index Slips Badly in April
The Pending Home Sales Index (PHSI) gave back its entire March increase in April, falling to 95.5 from 101.1 one month earlier, the National Association of Realtorsreported Wednesday. The March index was revised downward from the originally reported 101.4, adding to the gloomy report.
Economist had expected the index to increase 0.5 percent from March.
Even with the decline though, the index is up 14.4 percent since April 2011, but is now at its lowest level since December, dampening expectations at the onset of the home-buying season.
Pending home sales are counted when sales contracts are signed and are viewed as a leading indicator of existing home sales; recent reports suggest that home re-sales should be a bit stronger over the next couple of months but at a level that is still fairly subdued. April pending sales would be included in the home sales report for June.
The PHSI in February – which translated into reported sales (closings) in April – had been 97.4, up 0.4 percent from 97.0 in January. April existing home sales, as reported, were up 3.4 percent from March.
In percentage terms, the month-month 5.5 percent decline in the index was the steepest since April 2011 when the index dropped 7.7 percent month-month.
The decline was the first in four months and was widespread. The index fell in three of the four census regions, improving only in the Northeast, and there by a modest 0.9 percent. The index plunged 12.0 percent in the West to 94.9, its lowest level since March 2011.
The PHSI has been drifting upward, albeit modestly for most of the past two years. The April drop coming at the beginning of the traditional home buying season is a disappointing signal tempered further by the reality that a substantial number of sales contracts are failing to meet underwriting tests and/or other loan standards.
Lawrence Yun, NAR chief economist offered a positive spin on the disappointing report saying a one-month setback in light of many months of gains does not change the fundamentally improving housing market conditions.
“Home contract activity has been above year-ago levels now for 12 consecutive months. The housing recovery momentum continues,” he said.
The index is based on a large national sample, representing about 20 percent of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.