Pending Home Sales Cool after Summer Upswing

The report this morning from the National Association of Realtors® (NAR) on pending home sales shows continued volatility in the housing market.  After reaching a two-year peak in July, the NAR's Pending Home Sales Index (PHSI) fell in August to 99.2 percent from the revised estimate of 101.9 in July.  August numbers are still slightly more than 10 percent higher than in August 2011 when the Index was at 89.6.

The PHSI is a forward-looking index based on contract signings.  Actual sales of the contracted homes are generally expected within 60 to 90 days of signing.

July had seen the most contract activity since April 2010 when buyers were rushing to beat the deadline for the home buyer tax credit.  The current report revised the July Index number upward from 101.7.

Lawrence Yun, NAR chief economist, said some volatility can be expected in the monthly readings.  "The performance in month-to-month contract signings has been uneven with ongoing shortages of lower priced inventory in much of the country, and across most price ranges in the West, but activity has remained at notably higher levels this year," Yun said. 

"The index shows 16 consecutive months of year-over-year increases, and that has translated into a higher number of closed sales. Year-to-date existing-home sales are 9 percent above the same period last year, but sales were relatively flat from 2008 through 2011," Yun added.

NAR expects existing-home sales to rise 9 percent this year to 4.64 million and another 8 percent in 2013 to nearly 5.02 million.  With generally balanced inventory conditions in many areas, the median existing-home price is projected to rise about 5 percent in both 2012 and 2013.

The August dip was felt almost nationwide.  The PHSI rose 0.9 percent to 78.2 in the Northeast region which is 19.9 percent above the level in August 2011.  Pending sales dipped in the other three regions, down 2.6 percent to 95.0 in the Midwest which also remained 19.9 percent higher year-over-year, and 1.1 percent in the South.  That region's index was 110.4 in August, 13.2 percent above one year earlier.  Tight inventories were blamed for a 7.2 percent decline in the August index, now 4.2 percent below one year earlier.