Pending home sales in the United States retrenched in April following three consecutive monthly gains, but are notably higher than a year ago, according to the latest data from the National Association of Realtors.
Its Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 5.5% to 95.5 from a downwardly revised 101.1 in March but is 14.4% above April 2011 when it was 83.5. The data reflects contracts but not closings.
Lawrence Yun, NAR chief economist, said a one month setback in many months of gains does not change the fundamentally improving housing market conditions.
‘Home contract activity has been above year-ago levels now for 12 consecutive months. The housing recovery momentum continues,’ he explained.
Yun also pointed out that home sales are staying well above the levels seen from 2008 to 2011.
‘Housing market activity has clearly broken out at notably higher levels and is on track to see the best performance since 2007. All of the major housing market indicators are expected to trend gradually up, but a new federal budget must be passed before the end of the year for the economy to continue to move forward,’ he added.
The PHSI in the Northeast rose 0.9% to 78.9 in April and is 19.9% higher than April 2011. In the Midwest the index slipped 0.3% to 93.0 but is 23% above a year ago. Pending home sales in the South fell 6.8% to 105.7 in April but are 13.3% higher than April 2011. In the West the index dropped 12% in April to 94.9 but is 5.1% above a year ago.
The housing forecast has been upgraded, with existing home sales expected to reach 4.66 million this year, compared with 4.26 million in 2011. The outlook for 2013 is now 4.92 million, but could vary significantly depending on lending and taxation.
If lending returns to normal, the 2013 outlook for existing home sales would measurably improve to 5.3 million, the NAR believes. However, a fiscal cliff scenario of higher taxes and sharp spending cuts beginning in early 2013, which is an unlikely event but still worth noting, would lower the sales projection to 4.5 million.
Because of measurably lower inventory supplies, the forecast for home prices has been upwardly revised with the median existing home price projected to rise 2 to 3% this year and 4 to 5% in 2013, with wide local market variations. Miami and Phoenix will easily achieve double-digit price growth by year end, NAR said.
Yun said the price gains will measurably reduce the number of underwater home owners.
‘For example, a 5% national price gain means the number of underwater home owners would fall to about nine million from current estimates of around 11 million. A 10% gain, say over the next two years, would reduce the underwater status to about seven million households out of 75 million owner occupied homes,’ explained Yun he said.
About 25 million homes are owned free and clear without a mortgage. Though the proportion of distressed properties is still high, the numbers have been falling over the past two years.
‘The diminishing share of distressed properties is another reason for higher home prices in upcoming months,’ Yun added.