Slight slide for pending home sales
Pending home sales stumbled in February but the drop is “minor,” according to the National Association of Realtors (NAR).
The Pending Home Sales Index (PHSI) fell 1% to 101.9 in February from 102.9 in January. The PHSI is a forward-looking indicator based on contract signings.
Year-over-year contract signings declined 4.9%, making this the 14th straight month of annual decreases, the NAR said.
Lawrence Yun, NAR chief economist, said the latest slight fall in pending sales isn’t alarming.
“In January, pending contracts were up close to 5%, so this month’s 1% drop is not a significant concern,” Yun said. “As a whole, these numbers indicate that a cyclical low in sales is in the past but activity is not matching the frenzied pace of last spring.”
Regionally, high home prices continue to haunt the West with current sales falling well below activity in 2018.
“There is a lack of inventory in the West and prices have risen too fast. Job creation in the West is solid, but there is still a desperate need for more home construction,” Yun explained.
The index in the West increased just 0.5% in February to 87.5 but fell 9.6% below a year ago. Pending home sales in the South rose 1.7% to an index of 121.8 in February, 2.9% lower than this time last year.
The PHSI in the Northeast declined 0.8% to 92.1 in February, and is now 2.6% below a year ago. In the Midwest, the index fell 7.2% to 93.2 in February, 6.1% lower than February 2018.
Yun said that he expects existing-home sales this year to decrease 0.7% to 5.30 million, and the national median existing-home price to increase around 2.7%. Looking ahead to 2020, existing sales are forecast to increase 3% but home prices are also expected to rise 3%.
While rising home prices and mortgage rates have hindered sales, there could be good news on the horizon for rest of 2019.
Yun said that he does not anticipate any interest rate increases from the Federal Reserve in 2019. “If there is a change at all, I would say the Fed will lower interest rates in 2019 or 2020. That would stimulate the economy and the housing market,” he said. “But the expectation is no change at all in the current monetary policy, which will help mortgage rates stay at attractive levels.”
The Pending Home Sales Index (PHSI) fell 1% to 101.9 in February from 102.9 in January. The PHSI is a forward-looking indicator based on contract signings.
Year-over-year contract signings declined 4.9%, making this the 14th straight month of annual decreases, the NAR said.
Lawrence Yun, NAR chief economist, said the latest slight fall in pending sales isn’t alarming.
“In January, pending contracts were up close to 5%, so this month’s 1% drop is not a significant concern,” Yun said. “As a whole, these numbers indicate that a cyclical low in sales is in the past but activity is not matching the frenzied pace of last spring.”
Regionally, high home prices continue to haunt the West with current sales falling well below activity in 2018.
“There is a lack of inventory in the West and prices have risen too fast. Job creation in the West is solid, but there is still a desperate need for more home construction,” Yun explained.
The index in the West increased just 0.5% in February to 87.5 but fell 9.6% below a year ago. Pending home sales in the South rose 1.7% to an index of 121.8 in February, 2.9% lower than this time last year.
The PHSI in the Northeast declined 0.8% to 92.1 in February, and is now 2.6% below a year ago. In the Midwest, the index fell 7.2% to 93.2 in February, 6.1% lower than February 2018.
Yun said that he expects existing-home sales this year to decrease 0.7% to 5.30 million, and the national median existing-home price to increase around 2.7%. Looking ahead to 2020, existing sales are forecast to increase 3% but home prices are also expected to rise 3%.
While rising home prices and mortgage rates have hindered sales, there could be good news on the horizon for rest of 2019.
Yun said that he does not anticipate any interest rate increases from the Federal Reserve in 2019. “If there is a change at all, I would say the Fed will lower interest rates in 2019 or 2020. That would stimulate the economy and the housing market,” he said. “But the expectation is no change at all in the current monetary policy, which will help mortgage rates stay at attractive levels.”