The Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts, fell a steep 5.6% in September 2013 to 101.6 from a downwardly revised 107.6 in August. The September 2013 PHSI reported by the National Association of Realtors (NAR) was 1.2% lower than the same period a year ago.
The September PHSI decreased sharply in three regions: 9.6% in the Northeast, 8.3% in the Midwest and 9.0% in the West. The September PHSI fell only slightly by 0.4% in the South. Year-over-year, the PHSI fell 6.4% in the Northeast and 9.8% in the West, but increased 5.7% in the Midwest and 2.0% in the South.
The PHSI has declined for four consecutive months, and the September PHSI decreased to the lowest level since December 2012. It is worth noting that existing homes sales are reported on a contracts closed basis, so they reflect market conditions with a longer lag than pending sales. These new data suggest a decline in existing home sales for the rest of the year with no upward lift going forward into 2014.
The government shutdown took a toll on consumer confidence. That decline could prove to be temporary depending on how the ongoing budget negotiations in Congress play out over the final course of 2013.
Over the long run, 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 recent information illustrates that there will be ups and downs along the way, demographic growth and constrained housing inventory will support housing demand going forward.