Pending homes sales declined again in August, with the National Association of Realtors (NAR) revealing the Pending Home Sales Index (PHSI)—a forward-looking indicator based on contract signings—slipped 1.2% to 88.6. This follows a 1.3% decline in July.
Results were mixed across the regions. A notable decline in the PHSI was observed in the Northeast (-5.8%), where sales were significantly disrupted by Hurricane Irene. The PHSI also contracted in the Midwest (-3.7%) and West (-2.4%), but there was a moderate gain in the South (+2.6%).
Overall the index has generally moved sideways in 2011, showing a slight decline from a value of 88.9 in January. The lack of progress is a reflection of the soft economy and weak employment growth since the beginning of the year. The NAR suggest the market is underperforming and, “based on improving fundamentals of population growth, some job additions, rent increases and higher stock market wealth” existing home sales should be higher than they currently are. The NAHB have a different view. Given the current weak economic activity, slow jobs growth, low consumer confidence and restrictive mortgage lending standards—in addition to the imminent lowering of conforming loan standards—there is little to stimulate housing demand. Therefore, we expect existing (and pending) home sales remain relatively flat for the remainder of the year, before beginning to pick up in 2012.