The Pending Home Sales Index, a forward-looking indicator based on signed contracts, increased 1.5% in March 2013 to 105.7 from a downwardly revised 104.1 in February. The March 2013 PHSI reported by the National Association of Realtors (NAR) was 7.0% higher than the same period a year ago. NAR reported that pending home sales have been above their previous year levels for the past 23 months.
The modest increase in the PHSI mirrored last week’s reported total 1.5% increase in March new home sales. The March PHSI was consistent across the regions. The PHSI was flat in the Northeast and increased 0.3% in the Midwest, 2.7% in the South and 1.5% in the West. By contrast, March new home sales increased sharply from the previous month in the Northeast and South, but decreased in the Midwest and West. Year over year, the PHSI decreased 4.3% in the West, but increased 6.3%, 13.7% and 10.4% in the Northeast, Midwest and South respectively.
NAR attributed the modest PHSI increase to limited inventory, despite reporting a slight increase in the March inventory level. Rising prices will continue to induce more homeowners to place their homes on the market and broaden choices for potential home buyers. Rising prices might also dampen the enthusiasm of all-cash investors, and further ease the pressure on inventory.
If contracts closed at the same time they were signed, this graph would be the correspondence between sales and the PHSI. So the PHSI is a good indicator of what will likely happen to existing home sales when the contracts close in coming months. We anticipate that the April 2013 and May 2013 existing sales data will reflect today’s pending sales report, suggesting continued moderation in existing home sales as we move through the spring.