The Pending Home Sales Index, a forward-looking indicator based on signed contracts, decreased 0.4% in June 2013 to 110.9 from a downwardly revised 111.3 in May. The June 2013 PHSI reported by the National Association of Realtors (NAR) was 10.9% higher than the same period a year ago. NAR reported that the June PHSI represented the 26th consecutive month that pending home sales have been above their previous year levels.
The June PHSI was flat in the Northeast, decreased by 1.0% and 2.1% in the Midwest and South respectively, but was up 3.3% in the West. Year over year, the PHSI increased 12.2%, 19.5%, 9.5% and 4.4% n the Northeast, Midwest, South and West.
The slip in the PHSI contrasts with the strong 8.3% increase in new June home sales reported last Wednesday, but is consistent with the 1.2% decrease in June existing sales reported a week ago. NAR attributed the PHSI decrease to the lack of inventory and the impact of rising mortgage rates. The increase in home prices over the last year may also push some buyers – particularly investors – to the sidelines.
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 July 2013 and August 2013 existing sales data will reflect today’s pending sales report, suggesting weaker than recent reports for existing home sales in the face of higher mortgage rates.
Economic and housing data continue to describe a modest recovery for housing that will lead to higher levels of construction activity in the years ahead. While some recent information illustrates that there will be ups and downs along the way, currrent fundamentals indicate rising demand and insufficient housing inventory