Pending Home Sales Slide In November

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

The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, fell 2.6% to 125.7 in November, the third straight month of decline. Year-over-year, contract signings climbed 16.4%. An index of 100 is equal to the level of contract activity in 2001.

"The latest monthly decline is largely due to the shortage of inventory and fast-rising home prices," said Lawrence Yun, NAR’s chief economist. "It is important to keep in mind that the current sales and prices are far stronger than a year ago." (more here)

The chart below gives us a snapshot of the index since 2001. The MoM came in at -2.6%, down from a 0.9% decrease last month. Investing.com had forecast an increase of 0.2%. The index is below its all-time high.

Pending Home Sales

Over this time frame, the US population has grown by 16.5%. 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 5% below its all-time high. The population-adjusted index is 12% 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.

Disclosure: None.

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