A Mixed Bag; Pending Sales Down in April, But Historically High

The national and regional statistics for pending home sales in April were released Wednesday by the National Association of Realtors (NAR) and show a year-over-year decline both nationally and in all four regions. The national index for April is down 3.3 percent to 109.8, and marks the largest year-over-year decline since June 2014 (7.1 percent) and the first year-over-year decline since December of 2016.

Lawrence Yun, NAR chief economist, affords the drop to the “double whammy this spring of inventory that’s down 9.0 percent from a year ago, and price appreciation that’s much faster than any rise [potential buyers have] likely seen in their income.” Coupled with a reduction in the number of new homes being built and too little homes being put up for sale, a slump was almost inevitable. According to Yun, it also doesn’t help pending home sales that investors that purchased single family homes as rental investments during the downturn have continued to hold onto their properties. That could change, however, as inventory is replenished and the demand to rent becomes less.

And although indexes have dropped, all regions with the exception of the Northwest still remain above 100, which NAR reports “coincides with a historically high level of home sales activity.” In the West region, the year-over-year index is down to 100.0 (4.2 percent). The Midwest region saw the largest year-over-year decrease at 6.1 percent to and index of 104.4. The South region, on the other hand, only dropped 2.3 percent and has the highest index in the country at 125.9; the Northwest saw the smallest year-over-year reduction at 0.6 percent, but remains the nation’s lowest index at 97.2.

Yun estimates, even with the current downturn, that by the end of the year home sales will have increased 3.5 percent to 5.64 million from 2016’s final figure of 5.45 million. Yun also estimates the average existing home price will increase around 5 percent in comparison to 2016’s 5.1 percent.

May’s Pending Sales Index will be released at 10 a.m. on June 28, 2017.

About the Pending Home Index:

A home is considered pending when the contract has been signed but the transaction has yet to be closed. The index is based on approximately 20 percent of the transactions for the sale of existing-homes, and has been shown to mirror the level of closed existing-home sales in the following two months, as the average time from signing to closing is two months.

For reference, and index of 100 is equal to the average level of contract activity during 2001, when the data first began to be recorded.