September 29, 2011 (Chris Moore)
The Pending Home Sales Index (PHSI) declined by 1.2 percent to 88.6 in August according to the National Association of Realtors (NAR). This was the second consecutive monthly decline for the PHSI, but is still higher than August of last year.
Last year the Index was 7.7 percent lower at 82.3, however, the Index in August of last year was still feeling the affects of the lull in housing activity due to the end of the home buyer’s tax credit.
All regions but the South showed a decline in their monthly level of sales contract activity.
Pending home sales increased in the South by 2.6 percent to 96.9 and was 7.6 percent higher than a year ago, while in the West, pending home sales fell 2.4 percent to 108.1, but were 10.5 percent higher than in August of 2010.
In the Northeast, the PHSI slipped 5.8 percent to 63.6 in August, but was still 1.3 percent higher than August 2010, and in the Midwest, the index fell 3.7 percent to 76.2, but is 8.2 percent above a year ago.
The PHSI is a forward looking indicator which generally indicates closings one to two months in the future. But that isn’t always true.
In July, the PHSI was down 1.3 percent, much of which would be reflected in August’s Existing Home Sales report, but home sales in August jumped up 7.7 percent which was likely due to borrowers rushing to beat the new lower loan limits that take effect on October 1st, of which some lenders began adopting even back in August (see here).
Lawrence Yun, chief economist of NAR, once again stressed that tight credit was one of the primary reason for an underperforming housing market.
“We continue to experience a pattern in which financially qualified home buyers, willing to stay well within their means, are being denied credit – a factor in elevated levels of contract failures,” he said. “Based on the improving fundamentals of population growth, some job additions, rent increases and higher stock market wealth, we should be seeing existing-home sales closer to 5.5 million, but are expecting just over 4.9 million this year. The unnecessarily restrictive mortgage underwriting standards are attenuating the housing recovery and are a risk factor for the overall economy.” Yun stated.
Tags: NAR, pending home sales, existing home sales, tight credit, economic uncertainty, housing recovery