The Pending Home Sales Index,* (PHSI) a forward-looking indicator based on contracts signed in January, fell 7.6 percent to 90.4 from an upwardly revised 97.8 in December, but remains 12.3 percent higher than January 2009 when it was 80.5.
Lawrence Yun, NAR chief economist, said weather is likely to impact housing data. “January pending sales, though still higher than one year ago, remain much lower than expected given that a large number of potential buyers are eligible for the expanded home buyer tax credit. Moreover, the abnormally severe and prolonged winter weather, which affected large regions of the U.S., hampered shopping activity in February,” he said.
As such, abnormal swings are expected in housing data. “We will see weak near-term sales followed by a likely surge of existing-home sales in April, May and June,” Yun said. “The real question is what happens in the second half of the year. If there is sufficient job creation, housing can become self-sustaining with stable to modestly rising home prices because inventory has been trending downward.”
The PHSI in the Northeast fell 8.7 percent to 71.3 in January but is 20.5 percent higher than January 2009. In the Midwest the index dropped 8.9 percent to 81.2 but is 11.8 percent above a year ago. Pending home sales in the South slipped 2.1 percent to an index of 98.1, but the index is 18.0 percent higher than January 2009. In the West the index dropped 13.2 percent to 102.9 but is 1.4 percent above a year ago.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.
Each March, NAR Research conducts a review of PHSI seasonal adjustment factors and fine-tunes monthly data for the past three years.
Existing-home sales for February will be reported March 23 and the next Pending Home Sales Index will be on April 5; release times are 10 a.m. EDT.
NOTE: NAR’s annual Vacation and Investment Home Survey, covering 2009 second-home sales, prices, buyer demographics and motivational factors, will be released on March 31.
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