Pending Home Sales Fall, But Still Holding Most of 2019’s Gains

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April’s pending home sales had been
expected to build on the gains posted in two of the three previous months, but they
retreated instead. 
The National
Association of Realtors® (NAR) said its Pending Home Sale Index (PHSI), a
measure of newly signed home purchase contracts, fell 1.5 percent from its
March level.  The Index, with a 104.3
reading, was down from 105.9 the previous month.

The consensus of analysts surveyed by
Econoday had been for an 0.5 percent increase in the PHSI.  Forecasts ranged from -1.8 to 1.5 percent.

Pending sales were down in three of the
four major regions, and the April decline put year-over-year contract signings 2.0
percent behind those of April 2018.  It
was the 16th straight month that pending sales had failed to improve
on those a year earlier.

The PHSI is a leading indicator for
existing home sales.  Contract signings
are expected to be reflected in closed sales of pre-owned single-family houses,
townhomes, condos, and cooperative apartments within one to two months.  

Lawrence Yun,
NAR chief economist, said the sales dip has yet to account for some of the more
favorable trends toward homeownership
, such as lower mortgage rates. “Though
the latest monthly figure shows a mild decline in contract signings, mortgage
applications and consumer confidence have been steadily rising,” he said. “It’s
inevitable for sales to turn higher in a few months.”

Inventories,
which have taken the blame for lagging sales for quite some time, are reflected
in the pattern of both sales and home prices. NAR says the supply of available homes
priced under $250,000 stood at 3.3 months in April while there is an estimated
supply of 8.9 months of homes priced for $1 million or more.  Yun commented, “Home price appreciation has
been the strongest on the lower-end as inventory conditions have been
consistently tight on homes priced under $250,000. Price conditions are soft on
the upper-end, especially in high tax states like Connecticut, New York and
Illinois.”

He said there
does seem to be an increase in inventory in many, mostly pricey areas. 
San Jose, Seattle, the San Francisco Bay area,
Portland, Oregon; and Nashville saw the largest increase in active listings in
April compared to a year ago. “We are seeing migration to more affordable
regions, particularly in the South, where there has been recent job growth and
homes are more affordable,” Yun said.

The Midwest was
the only major region where the PHSI rose
in April, increasing 1.3 percent to
96.8, but remaining down 2.4 percent on an annual basis. The PHSI in the
Northeast declined 1.8% to 88.9 and is now 2.1% below a year ago.

Pending home
sales in the South fell 2.5% to an index of 124.0 which is 1.8% lower than last
April. The 93.5 index reading in the West is 1.8 percent and 1.5 percent lower
than the two earlier periods.

The PHSI is a leading indicator of existing home sales
and is based on a large national sample, typically representing about 20
percent of transactions for existing-home sales. In developing the model for
the Index, it was demonstrated that the level of monthly sales-contract
activity parallels the level of closed existing-home sales in the following two
months.

An index of
100 is equal to the average level of contract activity during 2001, which was
the first year to be examined. By coincidence, the volume of existing-home
sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered
normal for the current U.S. population.

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