Pending Sales Down

The Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts, decreased 0.8% in February to 93.9 from a downwardly revised January level of 94.7. The PHSI now has declined eight straight months, and is at the lowest level since the 92.2 reported in October 2011. The February 2014 PHSI reported by the National Association of Realtors (NAR) was 10.5% lower than the same period a year ago.
Pending Home Sales February 2014

 

The February PHSI increased in the Midwest and West by 2.8% and 2.3% respectively, and fell in the Northeast and South by 2.4% and 4.0% respectively. All regions fell year-over-year, ranging from 7.4% in the Northeast to 16.5% in the West.

Two days ago Census reported a 3.3% decrease in February new home sales. For the second consecutive month, the unusually severe winter has slowed the housing market. However, the growth in household formations and strong pent-up demand will move the market forward later this year. The downward slide in the PHSI indicates existing home sales will remain flat over the next two months.



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  1. This should come as no surprise to anyone. It is attributable to several important factors largely being ignored by industry leaders. First, although interest rates have only increased by about 100 basis points, the fact of the matter is that rates were so low that P & I payments are now 25% higher as a result of what appears as a relatively insignificant increase. Another is that our current national housing policy is to price FHA out of the market to “save it for future generations”. You will note that the real estate market is going in the opposite direction of the MMI Fund, at least temporarily. If you add the higher UFMIP and MIP to the higher P & I payment, the increase has been very significant and its little wonder the first-time buyers are staying put. Finally, although there is still some use left in FHA financing and VA and USDA remain very viable, the lack of promotion of this type of financing by the industry is deafening. While study after study indicates that renters want to buy, too many are not doing so because they are under the mistaken impression that a down payment of 20% to 30% is required and little or nothing is being done to correct that impression.

Trackbacks

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