Pending Home Sales Defy Expectations, Remain Lower Year-on-Year

Pending Home Sales Defy Expectations, Remain Lower Year-on-Year 

After a surge in new home sales (partly due to previous downward adjustments) and a sharp drop in existing home sales in March (accompanied by a significant decrease in housing starts and permits), expectations were for a slight month-over-month increase in pending home sales data this morning (less than February's increase), while still showing a year-over-year decline.

Surprisingly, pending home sales exceeded expectations on a month-over-month basis (+3.4% compared to an expected +0.4%), but fell short of expectations on a year-over-year basis (-4.5% compared to an expected -3.0%). On a seasonally-adjusted basis, sales saw a marginal 0.1% year-over-year increase.

This marks the 28th consecutive month of year-over-year declines in non-seasonally-adjusted pending home sales, keeping them just above their lowest recorded levels.

The increase was driven primarily by the South and West regions, with some contribution from the Northeast, while the Midwest experienced a 4.3% month-over-month decline. However, all regions still showed year-over-year decreases.

Despite reaching a relatively high point, Lawrence Yun, Chief Economist at NAR, noted that the pending-sales index has remained within a narrow range over the past year, lacking significant breakthroughs. Yun emphasized that substantial improvements would require declining mortgage rates and increased inventory.

Considering the strong correlation with mortgage rates, it appears that pending home sales are likely to continue their downward trend.

It's important to remember that the pending-home sales report serves as a leading indicator of existing-home sales since houses typically go under contract one to two months before they're sold.