Pending Homes Decline -2.8% in January, but Year-Over-Year are up 13.0%

The National Association of Realtors® (NAR) has reported their Pending Homes Sales Index (PHSI) — which is based on signed real estate contracts, not actual closings, for existing single-family homes, condos, and co-ops — declined -2.8% in January to a reading of 122.8. An index of 100 is equal to the level of contract activity in 2001. The NAR notes that contract transactions fell in three out of the four major U.S. regions, with only the South experiencing a modest gain. Year-over-year contract signings rose 13.0%. In prepared remarks for the PHSI release, Lawrence Yun, NAR’s chief economist, said, “Pending home sales fell in January because there are simply not enough homes to match the demand on the market. That said, there has been an increase in permits and requests to build new homes.” Following a week where January’s existing-home sales increased, Yun noted that pending contracts are a great early indicator for upcoming closed sales, but stressed that the timing of the relationship between existing-home sales and pending home sales may not be in lockstep. Yun went onto say that, “The two measurements aren’t always perfectly correlated due to varying amounts of time required to close a contract. This is because a number of fallouts can occur due to a variety of factors, including a buyer not obtaining mortgage financing, a problem with a home inspection, or an appraisal issue.”