(July 1, 2009 Release)
Highlights
• The pending home sales index rose 0.1 percent in May to 90.7, compared to 90.6 in April.
• The pending home sales index rose 6.7 percent from a year ago.
• The Northeast and West recorded monthly increases of 3.1 percent and 2.2 percent, respectively. The South and the Midwest recorded a declines of 1.7 and 1.3 percent, respectively.
| Pending Home Sales Index | ||||
| May 09 | Apr 09 | 3 mo Avg | 1 year ago | |
| United States | 90.7 | 90.6 | 88.6 | 85.0 |
| % change | 0.1 | 7.1 | 6.7 | |
| Northeast | 80.9 | 78.5 | 73.0 | 75.8 |
| % change | 3.1 | 31.9 | 6.8 | |
| Midwest | 89.2 | 90.4 | 87.3 | 80.0 |
| % change | -1.3 | 9.8 | 11.4 | |
| South | 92.6 | 94.2 | 93.3 | 85.8 |
| % change | -1.7 | 1.1 | 7.9 | |
| West | 96.9 | 94.8 | 94.9 | 96.2 |
| % change | 2.2 | 1.8 | 0.7 | |
Source: National Association of Realtors; index is seasonally adjusted
Analysis
The May pending homes sales release offered favorable news for future existing home sales activity in our nation’s housing sector. The index increased slightly on month over month and strongly on a year over year basis. Both were improvements from the April numbers. However, we note that most of the increase continues to occurr in the Northeast which increased by 3.1 percent after increasing by 32.6 percent in April. The index for the Northeast has been particularly erratic over the past five months so the 3 month average might be a more useful indicator.
The pending home sales index has now increased for four consecutive months. However, according to the NAR, there are delays in the number of contracts to go to closing due to new appraisal rules. Thus, there is some fallout in from pending contracts to actual closings. As a result, the upward drift in pending home sales may not necessarily translate into increases in existing home sales. Pending home sales measures contracts on existing homes rather than closings so the improvement in the index usually portends favorably for future existing home sales reports.
Looking forward, it is likely that the housing sector is scraping bottom as evidenced by recent monthly data of the major housing measures– housing starts, existing home sales and new home sales which are posting numbers slightly above their January cyclical lows. This pending home sales release suggests that it is likely that existing home sales may drift slighty upward in the coming months. However, a recession and a deteriorating job situation will keep the housing sector from experiencing any meaningful gains for the remainder of this year.
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