Pending Sales Break 3-Month Winning Streak

Pending home sales fell in April, breaking a three month streak of gains according to the National Association of Realtors® (NAR). The Association's Pending Home Sales Index (PHSI) declined 5.5 percent to 95.5 from a revised March number of 101.1 but is 14.4 percent higher than in April 2011 when it stood at 83.5.  The March revision was from an original estimate of 101.4.

NAR's forward-looking indicator is based on contract signings and does not reflect actual closed sales.  Contracts are generally expected to close within 30 to 60 days.

Lawrence Yun, NAR chief economist, said a one-month setback in light of many months of gains does not change the fundamentally improving market conditions.  "Home contract activity has been above year-ago levels now for 12 consecutive months.  The housing recovery momentum continues," he said.

Yun pointed out that actual sales are still well above the levels seen from 2008 through 2011.  "Housing market activity has clearly broken out at notably higher levels and is on track to see the best performance since 2007.  All of the major housing market indicators are expected to trend gradually, up but a new federal budget must be passed before the end of the year for the economy to continue to move forward."

NAR has upgraded its housing forecast with existing home sales now expected to hit 4.66 million in 2012 compared to 4.26 million in 2011.  NAR is projecting 4.92 million home sales in 2013 but this, NAR says, could vary significantly depending on two factors.  First, if lending returns to normal, sales could conceivably improve to 5.3 million.  However, higher taxes and sharp spending cuts commencing at the first of next year could reduce sales to 4.5 million.  The forecast views such a double whammy as unlikely.

The PHSI was down month-over-month in three out of four regions.  Only in the Northeast did it increase from March, up 0.9 percent to 78.9, 19.9 percent higher than a year earlier.  The index in the Midwest was 93.0, slipping 0.3 percent from March but 23.0 percent higher than in April 2011.  The South dropped 6.8 percent month-over-month to an index of 105.7 but remained 13.3 percent higher than in the corresponding 2011 period.  The West saw the biggest change, declining 12.0 percent to 94.9 but this was still a 5.1 percent improvement from a year earlier.