Pending Home Sales Index shows market may be stabilizing MortgagePress.comNational Association of Realtors, statistics, existing-home sales
A forward-looking indicator based on pending home sales shows
the housing market could edge down but appears to be in the process
of leveling out, according to the National Association of Realtors
The Pending Home Sales Index (PHSI), based on contracts signed
in April, stood at 101.4, down 3.2 percent from an upwardly revised
March reading of 104.8, and is 10.2 percent lower than April 2006
when it registered 112.9. The revised March index was 10 percent
below a year earlier.
Lawrence Yun, NAR senior economist, said the current index
appears to be a fair representation of overall housing market
conditions. "It looks like we may be leaving a period of market
disruptions, and for the past two months, the pending home sales
index has been similar in year-ago comparisons, which means home
sales might ease, but should be fairly stable in the months ahead,"
"In April, existing-home sales declined in part because some
sub-prime lenders went out of business and disrupted the market,
but the impact appears to be diminishing and mortgage applications
have risen in the last month," Yun said. "This tells us that some
borrowers who originally planned to finance with sub-prime
mortgages are finding suitable loans in the conventional market,
which will help to stabilize home sales."
"On the other hand, psychological factors seem to be holding
buyers back as they look for clear signs that the market has
bottomed--that varies from one area to another."
The index is a leading indicator for the housing sector, based
on pending sales of existing homes. A sale is listed as pending
when the contract has been signed but the transaction has not
closed, though the sale usually is finalized within one or two
months of signing.
An index of 100 is equal to the average level of contract
activity during 2001, which was the first year to be examined, as
well as the first of five consecutive record years for
Annual changes in the index are more closely related to actual
market performance than are month-to-month comparisons. As the
relatively new index matures and seasonal adjustment factors are
refined, the month-to-month comparisons will become more
In April, the PHSI in the Midwest rose 2.3 percent in April to
98.1, but was 4.4 percent below a year ago. The index in the South
increased 0.7 percent from March to 116.0, but was 10.4 percent
below April 2006. The index in the West fell 10.2 percent in April
to 91.4 and was 11.7 percent lower than a year ago. In the
Northeast, the index dropped 10.4 percent from March to 89.3 and
was 15.4 percent below April 2006.
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