The Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts, ticked up 0.1% in January, following a revised 5.8% drop in December, which was the lowest since the 94.6 reported in November 2011. The January 2014 PHSI reported by the National Association of Realtors (NAR) was 9.0% lower than the same period a year ago.
The January PHSI increased in the South and Northeast by 3.5% and 2.3% respectively, but decreased in the West and Midwest by 4.8% and 2.5% respectively. Year-over-year, the January PHSI fell in all four regions, ranging from 17.5% in the West to 5.3% in the Northeast.
The January 2014 PHSI broke a pattern of decreasing PHSI readings from July through December 2013. The NAHB Wells Fargo Housing Market Index reported a 10 point drop on February 18, and NAR reported a 5.1% January decrease in existing home sales on February 21. Two days ago Census reported a 9.6% increase in January new home sales. Yesterday, Federal Reserve Chair Janet Yellen reported to the Senate Banking Committee suggesting that extreme winter weather might have been a factor in the economy hitting a slow patch, but that any adjustment in strategy would await further data. Today the government revised fourth quarter GDP growth down to 2.4%.
The jury is out as to what impact severe weather has had on the housing market. The slight uptick in PHSI indicates that although existing home sales during the first quarter of 2014 will be dampened by severe weather, demographic growth and pent-up demand will support a modest recovery leading to higher levels of new residential construction activity going forward.