Pending Home Sales Fall in March

This morning the National Association of Realtors released the March data for their Pending Home Sales Index. Here is an excerpt from the latest press release:

“The housing market is temporarily grappling with the coronavirus-induced shutdown, which pulled down new listings and new contracts,” said Lawrence Yun, NAR’s chief economist. “As consumers become more accustomed to social distancing protocols, and with the economy slowly and safely reopening, listings and buying activity will resume, especially given the record low mortgage rates.”

“The usual Spring buying season will be missed, however, so a bounce-back later in the year will be insufficient to make up for the loss of sales in the second quarter,” he said. “Overall, home sales are projected to have declined 14% for the year.” (more here)

The chart below gives us a snapshot of the index since 2001. The MoM came in at -20.8%, down from a 2.3% increase last month. Investing.com had forecast a decrease of 10.0%.

Over this time frame, the US population has grown by 16.1%. 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.

The index for the most recent month is 31% below its all-time high in 2005. The population-adjusted index is 38% off its 2005 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.