January 2019 Pending Home Sales Jump?

The National Association of Realtors (NAR) seasonally adjusted pending home sales index remains in contraction but with less year-over-year contraction. Our analysis also shows improvement in the year-over-year contraction. The quote of the day from this NAR release:

... Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers. ...

Analyst Opinion of Pending Home Sales

The rolling averages remain in negative territory. The data is very noisy and must be averaged to make sense of the situation. The long term trends continue to be downward. Note that the downward trend of home sales began in mid-2015 - and unlike the NAR's optimism, we see no upturn for home sales in 2019.

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 increased 4.6 % month-over-month and down 2.3 % year-over-year (originally reported down 9.8 % last month).
  • The market [from Econoday} was expecting month-over-month growth of -11.0 % to 1.0 % (consensus -3.0 %).

Econintersect's evaluation using unadjusted data:

  • the index growth rate accelerated 6.3 % month-over-month and down 3.2 % year-over-year.
  • The current trend (using 3-month rolling averages) is accelerating but in contraction.
  • Extrapolating the pending home sales unadjusted data to project February 2019 existing home sales would be down 4.4 % year-over-year for existing home sales.

    (Click on image to enlarge)

From Lawrence Yun, NAR chief economist:

.... expected an increase in January home sales. A change in Federal Reserve policy and the reopening of the government were very beneficial to the market.

Higher rates discouraged many would-be buyers in 2018. Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers.

Additionally, year-over-year increases in active listings from data at realtor.com® to illustrate the potential rise in inventory. Denver-Aurora-Lakewood, Colo., Seattle-Tacoma-Bellevue, Wash., San Diego-Carlsbad, Calif., Los Angeles-Long Beach-Anaheim, and Nashville-Davidson-Murfreesboro-Franklin, Tenn., saw the largest increase in active listings in January compared to a year ago.

Positive pending home sales figures in January will likely continue. Income is rising faster than home prices in many areas and mortgage rates look to remain steady. Furthermore, job creation will help lift home buying.

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