Pending Home Sales Slid in April

The National Association of Realtors released the March data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales slipped in April, as contract activity decreased for the sixth consecutive month."

WASHINGTON (May 26, 2022) – Pending home sales slipped in April, as contract activity decreased for the sixth consecutive month, the National Association of Realtors® reported. Only the Midwest region saw signings increase month-over-month, while the other three major regions reported declines. Each of the four regions registered a drop in year-over-year contract activity.

The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, slid 3.9% to 99.3 in April. Year-over-year, transactions fell 9.1%. An index of 100 is equal to the level of contract activity in 2001.

"Pending contracts are telling, as they better reflect the timelier impact from higher mortgage rates than do closings," said Lawrence Yun, NAR's chief economist. "The latest contract signings mark six consecutive months of declines and are at the slowest pace in nearly a decade." (more here)

The chart below gives us a snapshot of the index since 2001. The MoM came in at -3.9%, down from a 1.6% decrease last month. Investing.com had forecast a decrease of 2.0%.

Pending Home Sales

Over this time frame, the US population has grown by 17.2%. For a better look at the underlying trend, here is an overlay with the nominal index and the population-adjusted variant. The focus is pending home sales growth since 2001.

Pending Home Sales Growth

The index for the most recent month is currently 25% below its all-time high. The population-adjusted index is 31% off its high.

Pending versus Existing Home Sales

The NAR explains that "because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing-Home Sales by a month or two." Here is a growth overlay of the two series. The general correlation, as expected, is close. And a close look at the numbers supports the NAR's assessment that their pending sales series is a leading index.