The Pending Home Sales Index, based on contracts signed in April, stood at 101.4, down 3.2 percent from an upwardly revised March reading of 104.8. The index is 10.2 percent lower than April 2006 when it registered 112.9. The revised March index was 10 percent below a year earlier.
Lawrence Yun, NAR senior economist, says the current index appears to be a fair representation of overall housing market conditions. “It looks like we may be leaving a period of market disruptions," Yun says. "For the past two months the pending home sales index has been similar in year-ago comparisons, which means home sales might ease but should be fairly stable in the months ahead."
Will Sales Bounce Back?
In April, existing-home sales declined in part because some subprime lenders went out of business and disrupted the market, Yun says.
"But the impact appears to be diminishing and mortgage applications have risen in the last month,” he notes. “This tells us that some borrowers who originally planned to finance with subprime mortgages are finding suitable loans in the conventional market, which will help to stabilize home sales.”
On the other hand, Yun says psychological factors seem to be holding buyers back as they look for clear signs that the market has bottomed. That varies from one area to another, he adds.
Across the Region
The index is based on pending sales of existing homes; a sale is listed as pending when the contract has been signed but the transaction has not closed. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.
Here’s what the index indicated by region:
- Midwest: rose 2.3 percent in April to 98.1, but was 4.4 percent below a year ago.
- South: increased 0.7 percent from March to 116, but was 10.4 percent below April 2006.
- West: fell 10.2 percent in April to 91.4, and was 11.7 percent lower than a year ago.
- Northeast: dropped 10.4 percent from March to 89.3, and was 15.4 percent below April 2006.