Pending Home Sales Index Drops in April

Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • National Association of Realtors’ April Pending Home Sales Index (PHSI) FELL 1.5 percent from March to 104.3;
  • Year-year the index was DOWN 2.0 percent.

Trends:

  • The Index remained over 100 for the fourth time this year;
  • Index is down year-year for 16 straight months.

Data Source: National Association of Realtors (NAR)

Image result for pending home sales

With concern about rising home prices despite falling interest rates, the National Association of Realtors’ pending home sales index fell in April, down from its highest level since last June.

Regionally, the index fell in three of the four census regions, improving only in the Midwest where it rose from 95.6 to 96.8. The steepest decline was in the South where the index fell from 127.2 to 124.0. Last week, the Census Bureau and Department of Housing and Urban Development reported the federal government report on new home sales, which is also based on contract signings, dropped 6.9 percent from March to April.

The NAR report suggests closings in June will decline and, given the sharp increase in pending home sales in March, the decline could be steep.

Meanwhile, Freddie Mac reported the average rate for a 30-year fixed rate mortgage dipped below 4.00 percent – to 3.99 percent – for the first time since last November. The drop, from 4.06 percent one week ago, would reduce the monthly payment (excluding taxes and insurance) for a 30-year fixed rate loan of $300,000 from $1,444.27 to $1,432.17 – a savings of $12.10.

The monthly drop in the PHSI was the 8th in the last 12 months underscoring ongoing difficulties in the housing market. New home sales have fallen in six of the last 12 months. Although new home sales represent only about 10 percent of all home sales, they have a greater impact on the overall economy, affecting construction employment as well as sales of appliances and furnishings. Both appliance and furniture store stores have seen a decline in sales mirroring housing’s struggles.

Earlier this week, Standard & Poor’s reported its Case-Shiller Core-Logic Home Price Index showed that while home prices rose slightly from February to March, the rate of change of the year-year price increase has been slowing for almost a year.

The weaker home sales market has broader implications. In addition to a slowdown at related retail stores, the sales slump could affect seniors who were counting on proceeds from the sale of their homes to fund retirement. The most recent government report on homeownership showed a drop in the homeownership rate for seniors – from 78.8 percent to 75.8 percent but no corresponding increase for younger families, those under 35. Most economists consider the 35-44 age cohort prime homebuyers.

The timing of the dip in the PHSI suggest a weak beginning for the traditional home-buying season. Families with children step up home purchases during the late Spring in an effort to be settled in before the new school year begins.

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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