The National Association of Realtors (NAR) seasonally adjusted pending home sales index again improved and is now at their highest level in over nine years. Our analysis of pending home sales is significantly less rosey – and projects disappointing June home sales data. The quote of the day from this NAR release:
This year’s stronger sales amidst similar housing supply levels from a year ago have caused home prices to rise to an unhealthy and unsustainable pace.
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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 0.9% month-over-month and up 10.4% year-over-year (last month 14.0% year-over-year).
- The market was expecting month-over-month growth of 0.0 % to 3.0 % (consensus 0.6%) versus the growth of 0.9% reported.
Econintersect‘s evaluation using unadjusted data:
- The index growth was down 0.9% month-over-month and up 8.3% year-over-year.
- The current trends (using 3 month rolling averages) declined but remains in expansion.
- Extrapolating the pending home sales unadjusted data to project June 2015 existing home sales, this would be a meager 3.8 % 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 activity rose again in May for the fifth straight month, increasing the likelihood that home sales are off to their best year since the downturn. The steady pace of solid job creation seen now for over a year has given the housing market a boost this spring. It’s very encouraging to now see a broad based recovery with all four major regions showing solid gains from a year ago and new home sales also coming alive.
… this year’s stronger sales amidst similar housing supply levels from a year ago have caused home prices to rise to an unhealthy and unsustainable pace.
Housing affordability remains a pressing issue with home-price growth increasing around four times the pace of wages. Without meaningful gains in new and existing supply, there’s no question the goalpost will move further away for many renters wanting to become homeowners.
