Pending Home Sales Index Plunges in January

Mark Lieberman

Managing Director and Senior Economist


  • National Association of Realtors’ January Pending Home Sales Index (PHSI) fell 4.7 percent from December to 104.6;
  • PHSI for December was revised down from 110.1 to 109.8;
  • December drop was the first since September;
  • Year-year the index was DOWN 1.7 percentage points;


  • The December decline was the steepest since the PHSI fell 7.7 percentage points in April 2011;
  • The Index reading is the lowest since January 2015 when the index was at 104.5;
  • Index fell most sharply, 11.8 percentage points, in the Northeast to 87.0. the weakest reading on the region since 81.9 in March 2015.

Data Source: National Association of Realtors (NAR) 

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Just as the new tax law discouraged prospective buyers of new homes, it dropped the hammer on sales of existing single-family homes in January as the National Association of Realtors’ Pending Home sales index which tracks sales contracts of existing homes.

Part of the reason for the decline in the PHSI could be the long decline in the number of homes for sale. According to a separate NAR report on closings, fell from 1.68 million at the beginning of 2017 to 1.46 million in December, a 13 percent drop. (The number of homes for sale increased to 1.52 million in January, still down 9.5 percent in the last year.)

On a year-year comparison basis, the number of homes for sale has fallen for each of the last 32 months.

The decline in home sales left some observers scratching their heads noting the economy appears to be strong with the number of jobs continuing to grow and the unemployment rate continuing to fall.

Earnings growth has not kept pace with job growth however which may be holding some potential home buyers back and builders, despite their growing confidence, have been increasingly focused on multi-family rather than single-family construction.

The NAR index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. According to the NAR, the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. The January PHSI thus suggests another drop in closings in March.

Existing home sales, closings, fell 3.2 percent in January following a 2.8 percent decline in December.

The fall-off in contracts for existing homes paralleled the 7.8 percent decline in new home sales (contracts) in January which came on the heels of a 7.6 percent decline in December.

Muddying the waters, the new Federal Reserve Chair Jerome Powell hinted in Congressional testimony earlier in the week the Federal Open Market Committee may increase interest rates four times this year, not the three increases which had been expected. While the fed funds rate which the FOMC sets is not tied directly to mortgage rates, it does influence them.

The FOMC next meets March 20-21.

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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