The Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts, fell a slight 0.6% in October from an upwardly revised 102.7 in September. The October 2013 PHSI reported by the National Association of Realtors (NAR) was 1.6% lower than the same period a year ago.
The October PHSI increased 2.8% in the Northeast and 1.2% in the Midwest; the PHSI fell 4.1% in the West and 0.8% in the South. Year-over-year, the October PHSI increased 8.1% in the Northeast and 3.2% in the Midwest; the PHSI fell 12.1% in the West and 1.5% in the South.
NAR reported that the October PHSI was at 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. The 5.6% decrease in the September PHSI was consistent with the subsequent 3.2% decline in October existing home sales. After the brief surge in sales in the spring and summer as buyers reacted to the increase in mortgage rates, the government shutdown contributed to a dampening of sales. These new data suggest that after this brief period of fluctuation, the long-term trend of increasing sales will continue.
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.