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Pending Sales Down but Holding above “Normal” Mark

by devteam July 28th, 2014 | Share

Pending home sales declined modestly inrnJune after three months of what the National Association of Realtors®rn(NAR) called “solid gains.” NAR’s Pending Home Sales Indexrn(PHSI) declined 1.1 percent to 102.7 in June from 103.8 in May. June’s value was 7.3 percent below the level in June 2013 of 110.8. </p

ThernMay Index had surged by 6.11 percent compared to April, the largestrnmonth-over-month increase for the index since the period just beforernthe end of the homebuyer tax credit in April 2010. Despite the Junerndip, that the index remained above 100 for the second month in a rowrnis considered positive. Prior to the May surge the PHSI had failedrnto reach 100, which is viewed as an average level of contract activity, since November 2013. </p

ThernPHSI is a forward-looking indicator of home sales based on signedrnpurchase contracts. The contracts are generally expected tornculminate in completed sales transactions within 30 to 60 days. </p

LawrencernYun, NAR chiefrneconomist views the housing market as stabilizing but sees ongoingrnchallenges impeding it reaching its full sales potential. “Activityrnis notably higher than earlier this year as prices have moderated andrninventory levels have improved,” he said. “However, supplyrnshortages still exist in parts of the country, wages are flat, andrntight credit conditions are deterring a higher number of potentialrnbuyers from fully taking advantage of lower interest rates.” </p

Still Yun expects that salesrnwill tick upward during the second half of the year. “The goodrnnews is that price appreciation has decreased to its slowest pacernsince March 2012 behind much needed increases in inventory,” hernsaid. “With rents rising 4 percent annually, potential buyers arernless likely to experience sticker shock and can make smart decisionsrnon whether or not it makes sense to buy or continue renting.” rn</p

He expects that existing homernsales will be down 2.8 percent in 2014 to 4.95 million units comparedrnto 5.1 million in 2013. The national median home price is expectedrnto increase between 5 and 6 percent both this year and next.</p

The PHSI was mixed acrossrnregions. In the Northeast it fell 2.9 percent to 83.8 and is 3.2rnpercent below a year ago. In the Midwest the index rose 1.1 percentrnto 106.6, but remains 5.5 percent below June 2013. </p

Pending home sales in thernSouth dipped 2.4 percent to an index of 113.8 in June, and is 4.3rnpercent below a year ago. The index in the West inched 0.2 percent inrnJune to 95.7, but remains 16.7 percent below June 2013.</p

The PHSI is based on a largernnational sample, typically representing about 20 percent ofrntransactions for existing-home sales. An index of 100 is equal to thernaverage level of contract activity during 2001, which was the firstrnyear to be examined. By coincidence, the volume of existing-homernsales in 2001 fell within the range of 5.0 to 5.5 million, which isrnconsidered normal for the current U.S. population.</prnrn

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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