Pending Sales Pause

The Pending Home Sales Index decreased 0.8% in March 2017, but remains 0.8% above its level a year ago. The Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts reported by the National Association of Realtors (NAR), decreased to 111.4 in March, down from 112.3 in February.

The PHSI increased in the South by 1.2%, but fell by 1.2% in the Midwest and 2.9% in both the Northeast and West. Year-over-year, the PHSI increased 3.9% in the South and 1.8% in the Northeast, but fell 2.4% in the Midwest and 2.7% in the West.

March existing sales surged 5.8%, so the small decrease in the PHSI suggests a pause in sales for next month. NAR cites price growth as a damper to sales, especially among first-time buyers. However, builder sentiment remains firm, and March new home sales were strong. As the economy continues to add jobs, increased demand among first-time buyers will support new and existing sales in 2017.



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1 reply

  1. “As the economy continues to add jobs, increased demand among first-time buyers will support new and existing sales in 2017.” The concluding statement is unsupported speculation projecting into the future.

    Tourism, today, is down thanks to Trump’s policies. And so are international buyers, and immigration (exacerbating labor shortage). Trump policies are directly reducing population, and therefore demand, while the lumber tariff and labor shortage are increasing costs. What happens when demand goes down while costs increase? Probably going to result in fewer sales and a small to moderate correction and partial retrace. Who knows though, lots of interconnected influences, job growth is respectable. However, the HMI was around 70 in 2006, too, and prices have outpaced income dramatically.

    Unless I can raise rates on my rentals dramatically (I can’t), the current prices have priced investors like me out of the market with unfavorable capitalization rates, anticipating some crazy boom in the future based on sentiment. I don’t buy it. I’m happy with my entry points in 2008-2012.

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