March 2015 Pending Home Sales Index Again Improves

The National Association of Realtors (NAR) seasonally adjusted pending home sales index again improved and remains deeply in expansion. Our analysis of pending home sales agrees – and we are projecting a relatively good month for existing home sales in April 2015.

 

Pending home sales are based on contract signings, and existing home sales are based on the execution of the contract (contract closing).

The NAR reported:

• Pending home sales index was up 1.1% month-over-month and up 11.1% year-over-year.
• The market was expecting month-over-month growth of -1.4% to 3.5% (consensus 1.0%) versus the growth of 1.1% reported.

Econintersect‘s evaluation using unadjusted data:

• the index growth was unchanged month-over-month but up 17.0% year-over-year.
• The current trends (using 3 month rolling averages) improved – and are in expansion.
• Extrapolating the unadjusted data to project April 2015 existing home sales, this would be a 14.5% gain year-over-year for existing home sales.

Unadjusted 3 Month Rolling Average of Year-over-Year Growth for Pending Home Sales (blue line) and Existing Home Sales (red line)

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From Lawrence Yun , NAR chief economist:

…. contract signings picked up in March as more buyers than usual entered this year’s competitive spring market. Demand appears to be stronger in several parts of the country, especially in metro areas that have seen solid job gains and firmer economic growth over the past year. While contract activity being up convincingly compared to a year ago is certainly good news, the increased number of traditional buyers who appear to be replacing investors paying in cash is even better news1. It indicates this year’s activity is being driven by more long-term homeowners.

Demand in many markets is far exceeding supply, and properties in March sold at a faster rate than any month since last summer. This in turn has pushed home prices to unhealthy levels — nearly four or more times above the pace of wage growth in some parts of the country. Simply put, housing inventory for new and existing homes needs to improve measurably to improve affordability.