Pending Home Sales Index Down Again in February

Mark Lieberman

Managing Director and Senior Economist


  • National Association of Realtors’ February Pending Home Sales Index (PHSI) FELL 1.0 percent from January to 101.9;
  • January index was revised down to 102.9 from 103.2
  • Year-year the index was DOWN 4.9 percentage points;


  • The February decrease was the fourth in the last five months;
  • Index is down year-year for 14 straight months;

Data Source: National Association of Realtors (NAR)

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In another blow to home sales the NAR’s pending home sales index dropped again in February the fourth decline in the last five months. The drop in the NAR forecasting tool followed the Census Bureau report earlier this month that new home sales for January (contracts for sale) were off 6.9 percent. The report on new home sales for February I scheduled for release tomorrow.

The NAR report is yet another blow for an already beleaguered home sales market. Which has seen this key indicator for year-year for 14 straight months. The drop in the PHSI often presages a decline in existing home sales. The index fell in seven of the last 12 months and existing home sales dropped nine times, not a perfect match, but very close.

Adding to the already know explanations for the drop – heavy student loan burdens by younger buyers, fear of being burned as homeowners were in the Great Recession and slow increases in earnings, there’s now another concern with louder and more prolonged discussion of a coming recession.

The one positive sign is interest rates. With the decision by the Federal Open Market Committee at its meeting this month to now raise the benchmark Fed Funds rate, mortgage rates continue to trend downward reinforced by the FOMC indications it may be done raising rates for this year.

Still, the Fed Funds rate has little to do with mortgage rates which are tied usually to the London Interbank Offering Rate (LIBOR) and not the prime rate which is determined by the Fed Funds rate.

But reforms from the Great Recession / mortgage crisis have altered the lending landscape, eliminating easier to qualify low- and no-doc loans, the type that consigned many financial institutions to the dustbins of history and tightened lending requirements.

The PHSI data followed by just a few days President Trump’s announcement of plans to revamp the nation’s housing finance system, by, among other things, noting the importance of preserving the 30-year, fixed-rate mortgage, a bedrock housing finance.

The president’s announcement followed two days of hearings before the Senate Banking Committee

The next step is for Congress to move this process forward to revamp the housing finance system in a way that won’t interrupt the flow of credit.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.

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