Key Housing Indicator Drops

Pending home sales, which is a key forward looking indicator on the health of the housing market, dropped in December, this according to the National Association of Realtors® (NAR).

The Pending Home Sales Index (PHSI) fell 8.7 percent in December to 92.4, this was down from 101.2 in November, and is 8.8 percent below December 2012 when it was 101.3.  Pending home sales reflect contracts but not closings, and are at the lowest level since October 2011, when the index was 92.2.  Declines in pending sales were experienced in all four major regions and were partially attributed to the harsh weather in parts of the nation.

By region, the PHSI in the Northeast dropped 10.3 percent to 74.1 in December, and is 5.5 percent below a year ago. In the Midwest the index was 93.6 for December, which declined 6.8 percent from the previous month, and is 6.9 percent lower than December 2012. Pending home sales in the South fell 8.8 percent to an index of 104.9 in December, and are 6.9 percent below a year ago.

The index in the West, which was not impacted by inclement weather, but mostly impacted by constrained inventory, dropped 9.8 percent in December to 85.7; this is 16.0 percent below December 2012.

NAR chief economist, Lawrence Yun, noted that several factors impacted the PHSI, he said, “Unusually disruptive weather across large stretches of the country in December forced people indoors and prevented some buyers from looking at homes or making offers,” he added. “Home prices rising faster than income is also giving pause to some potential buyers, while at the same time a lack of inventory means insufficient choice. Although it could take several months for us to get a clearer read on market momentum, job growth and pent-up demand are positive factors.”