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Friday, February 28, 2014

NAR: Pending Home Sales Index down 9% year-over-year

by Calculated Risk on 2/28/2014 10:59:00 AM

From the NAR: Pending Home Sales Hold Steady in January

The Pending Home Sales Index, a forward-looking indicator based on contract signings, edged up 0.1 percent to 95.0 in January from an upwardly revised 94.9 in December, but is 9.0 percent below January 2013 when it was 104.4.
...
The December index reading was the lowest since November 2011, when it stood at 94.6.

The PHSI in the Northeast rose 2.3 percent to 79.0 in January, but is 5.3 percent below a year ago. In the Midwest the index declined 2.5 percent to 92.9 in January, and is 9.3 percent lower than January 2013. Pending home sales in the South increased 3.5 percent to an index of 111.2 in January, and is 5.5 percent below a year ago. The index in the West fell 4.8 percent in January to 84.2, and is 17.5 percent below January 2013.

Existing-home sales are expected to be weak in the first quarter
A few comments:
• Mr. Yun blamed some of the decline on the weather (the weather was unusually bad again in January), but the index remained weak in the South too (down 5.5% year-over-year and probably not weather), and in the West (partially related to low inventories).

• My view is there were several reasons for the decline in this index: weather in some areas, fewer distressed sales, less investor buying, fewer "pending" short sales, and low inventories.  I think fewer distressed sales, fewer "pending" short sales, and less investor buying are all signs of a healthier market - even if overall sales decline.

• Mr Yun lowered has forecast for 2014 to 5.0 million existing home sales, down from his previous forecast of 5.1 million existing home sales this year. I'll take the under on his new forecast, and I think it would be a positive sign if sales were under 5 million in 2014 as long as distressed sales continue to decline and conventional sales increase.

 • Of course, for housing, what really matters for the economy and employment is new home sales (not existing), and housing starts. 

Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in February and March.