Pending home sales, like both new and existing home sales reported earlier this month, posted an April loss.  The National Association of Realtors® said its Pending Home Sales Index (PHSI) declined 1.3 percent in April, down from its March reading of 107.8 (revised from 107.6) to 106.4.  The index, a leading indicator of existing homes sales, had posted modest increases in each of the previous two months. 

The PHSI is down 2.1 percent from its level in April 2017.  It was the fourth straight month the index has lagged on an annual basis.

Analysts had expected pending sales to extend their winning streak. The consensus of those polled by Econoday was a monthly gain of 0.4 percent.  The range of estimates was from unchanged to a 1.0 percent increase.  

Lawrence Yun, NAR chief economist, says the housing market this spring is hindered because of the severe housing shortages in much of the country. "Pending sales slipped in April and continued to stay within the same narrow range with little signs of breaking out," he said. "Feedback from Realtors®, as well as the underlying sales data, reveal that the demand for buying a home is very robust. Listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher."

Added Yun, "The unfortunate reality for many home shoppers is that reaching the market will remain challenging if supply stays at these dire levels."

Even though pending sales had been up for the previous two months, existing home sales were 2.5 percent lower in April than in March and are running behind last year's numbers.  New home sales also dipped by 1.5 percent for the month although they are well ahead of 2017 sales - 11.5 percent in April.

Heading into the summer months, if low supply and swift price growth were not enough of a headwind for the housing market, Yun believes that rising mortgage rates and gas prices could lead to hesitation among some would-be buyers.

"The combination of paying extra at the pump, while also needing to save more for a down payment because of higher rates and home prices, may weigh on the psyche of those looking to buy," he said. "For now, the economy is very healthy, job growth is holding steady and wages are slowly rising. However, it all comes down to overall supply. If more new and existing homes are listed for sale, it would allow home prices to moderate enough to stave off inflationary pressures and higher rates."

None of the four regional indices performed well in April. The PHSI in the Northeast remained at 90.6  and is 2.1 percent below a year ago.  The Midwest index was down 3.2 percent from March and 5.1 percent year-over-year.   

Pending home sales in the South were down 1.0 percent to an index of 127.3, remaining 2.7 percent higher than the previous April. The index in the West lost 0.4 percent to 94.4 and is 4.6 percent below a year ago. 

Despite April's downturn, Yun has not changed his forecast of 5.54 million existing home sales in 2018.  This would be an 0.5 percent increase from the 5.51 million sales last year. The national median existing-home price is expected to increase around 5.1 percent. In 2017, existing sales increased 1.1 percent and prices rose 5.7 percent.

The Pending Home Sales Index is based on signed contracts for home purchase.  The sale is usually finalized within one or two months of signing. The index 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.