WASHINGTON (May 29, 2014) – Pending home sales improved for the second straight month in April, according to the National Association of Realtors®. Gains in the Midwest and Northeast offset declines in the West and South.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, increased 0.4 percent to 97.8 in April from 97.4 in March, but is 9.2 percent below April 2013 when it was 107.7.
Lawrence Yun, NAR chief economist, expects a gradual uptrend in home sales. “Higher inventory levels are giving buyers more choices, and a slight decline in mortgage interest rates this spring is raising prospective home buyers’ confidence,” he said. “An uptrend in closed sales is expected, although some months will encounter a modest setback.”
Yun projects the 30-year fixed-rate mortgage to trend up and average 5.5 percent next year. “The extent to which higher mortgage interest rates will impact housing affordability and sales depends on income growth, ongoing improvement in the labor market and any change to mortgage underwriting conditions.”
The PHSI in the Northeast increased 0.6 percent to 79.3 in April, but is 12.0 percent below a year ago. In the Midwest the index rose 5.0 percent to 99.2 in April, but is 6.9 percent below April 2013. Pending home sales in the South slipped 0.6 percent to an index of 111.9 in April, and are 6.4 percent below a year ago. The index in the West declined 2.9 percent in April to 88.4, and is 15.0 percent below April 2013.
With sub-par activity in the first quarter, annual existing-home sales are expected to be modestly below the nearly 5.1 million in 2013, but should be close to 5.3 million in 2015. The national median existing-home price is projected to grow between 5 and 6 percent this year, and in the range of 4 to 5 percent in 2015.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 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.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.
NOTE: Existing-home sales for May will be reported June 23, the next Pending Home Sales Index will be June 30; release times are 10:00 a.m. EDT.