April's pending home sales had been expected to build on the gains posted in two of the three previous months, but they retreated instead. The National Association of Realtors® (NAR) said its Pending Home Sale Index (PHSI), a measure of newly signed home purchase contracts, fell 1.5 percent from its March level. The Index, with a 104.3 reading, was down from 105.9 the previous month.
The consensus of analysts surveyed by Econoday had been for an 0.5 percent increase in the PHSI. Forecasts ranged from -1.8 to 1.5 percent.
Pending sales were down in three of the four major regions, and the April decline put year-over-year contract signings 2.0 percent behind those of April 2018. It was the 16th straight month that pending sales had failed to improve on those a year earlier.
The PHSI is a leading indicator for existing home sales. Contract signings are expected to be reflected in closed sales of pre-owned single-family houses, townhomes, condos, and cooperative apartments within one to two months.
Lawrence Yun, NAR chief economist, said the sales dip has yet to account for some of the more favorable trends toward homeownership, such as lower mortgage rates. "Though the latest monthly figure shows a mild decline in contract signings, mortgage applications and consumer confidence have been steadily rising," he said. "It's inevitable for sales to turn higher in a few months."
Inventories, which have taken the blame for lagging sales for quite some time, are reflected in the pattern of both sales and home prices. NAR says the supply of available homes priced under $250,000 stood at 3.3 months in April while there is an estimated supply of 8.9 months of homes priced for $1 million or more. Yun commented, "Home price appreciation has been the strongest on the lower-end as inventory conditions have been consistently tight on homes priced under $250,000. Price conditions are soft on the upper-end, especially in high tax states like Connecticut, New York and Illinois."
He said there does seem to be an increase in inventory in many, mostly pricey areas. San Jose, Seattle, the San Francisco Bay area, Portland, Oregon; and Nashville saw the largest increase in active listings in April compared to a year ago. "We are seeing migration to more affordable regions, particularly in the South, where there has been recent job growth and homes are more affordable," Yun said.
The Midwest was the only major region where the PHSI rose in April, increasing 1.3 percent to 96.8, but remaining down 2.4 percent on an annual basis. The PHSI in the Northeast declined 1.8% to 88.9 and is now 2.1% below a year ago.
Pending home sales in the South fell 2.5% to an index of 124.0 which is 1.8% lower than last April. The 93.5 index reading in the West is 1.8 percent and 1.5 percent lower than the two earlier periods.
The PHSI is a leading indicator of existing home sales and is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the Index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.