(June 2, 2009 Release)
Highlights
• The pending home sales index rose 6.7 percent in April to 90.3, compared to 84.6 in March.
• The pending home sales index rose 3.2 percent from a year ago.
• The Northeast, Midwest, and West recorded monthly increases of 32.6 percent, 9.8 percent and 1.8 percent, respectively. The South recorded a decline of 0.2 percent.
| Pending Home Sales Index | ||||
| Apr 09 | Mar 09 | 3 mo Avg | 1 year ago | |
| United States | 90.3 | 84.6 | 85.6 | 87.5 |
| % change | 6.7 | 3.2 | 3.2 | |
| Northeast | 78.9 | 59.5 | 67.2 | 78.3 |
| % change | 32.6 | -5.7 | 0.8 | |
| Midwest | 90.4 | 82.3 | 85.3 | 81.4 |
| % change | 9.8 | -1.0 | 11.1 | |
| South | 93.0 | 93.2 | 90.7 | 89.8 |
| % change | -0.2 | 8.5 | 3.6 | |
| West | 94.8 | 93.1 | 92.5 | 97.7 |
| % change | 1.8 | 3.9 | -2.9 | |
Source: National Association of Realtors; index is seasonally adjusted
Analysis
The April pending homes sales release offered favorable news for future existing home sales activity in our nation’s housing sector. The index increased both on a month over month and year over year basis. Both were improvements from the March numbers. However, we note that most of the increase occurred in the Northeast which increased by 32.6 percent. The index for the Northeast has been particularly erratic over the past five months so the 3 month average might be a more useful indicator.
The rise in April’s pending home sales further strengthens the notion that the January’s 80.4 index may be the cyclical low for this release. Pending home sales measures contracts on existing homes rather than closings so the improvement in the index portends favorably for May/June existing home sales reports. However, it is likely that a meaningful number of these pending contracts may fallout before reaching closing due to tight lender credit requirements.
Looking forward, it is likely that the housing sector is scraping bottom as evidenced by recent monthly data of the major housing measures- housing starts, existing home sales and new home sales which are posting numbers slightly above their January cyclical lows. This pending home sales release suggests that it is likely that existing home sales may drift slighty upward in the coming months. However, a severe recession and a deteriorating job situation will keep the housing sector from experiencing any meaningful gains for the remainder of this year.
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