Pending homes sales bounced back in May after registering a sharp decline in April. The National Association of Realtors (NAR) announced an 8.2% increase in the Pending Home Sales Index (PHSI) in May, rising to 88.8, from an upwardly revised 82.1 in April. While this marks a sizable month-to-month gain, it was not enough to offset the 11.3% loss in April.
Solid gains were observed in all regions, with the PHSI surging 12.9% in the West, jumping 10.6% in the Midwest, rising 7.3% in the Northeast and up 4.1% in the South. Relative to a year ago, the PHSI is up in all regions, with the Midwest advancing 17.2%, the South climbing 14.6%, the West expanding 13.5% and the Northeast increasing 4.4% since May 2010.
The PHSI experienced a very strong recovery in the second half of 2010 following its collapse in May (-30%) and June (-3%) 2010—a direct consequence of the Home Buyer Tax Credit’s expiry. However, since the beginning of 2011, the index has moved sideways, making no progress and in fact trending downward slightly since December 2010.
The NAR opined that the gain in May “….point(s) to higher housing activity in the second half of the year ….” In their earlier release for May existing home sales, the NAR suggested that “The pace of sales activity in the second half of the year is expected to be much stronger than the first half ….” NAHB is less confident, as we anticipate existing home sales to remain relatively flat in the second and third quarters, before strengthening in the fourth quarter of 2011.