Pending Home Sales Index Eases
Economist: market has been encouraged by rising home sales over the
last two months
RISMEDIA, May 3, 2006—Pending home sales have slowed modestly as
interest rates continue to rise, according to the National Association
The Pending Home Sales Index,* based on contracts signed in March, eased
1.2 percent to a level of 116.2 from an index of 117.6 in February, and
is 6.0 percent below March 2005.
The index is derived from pending sales of existing homes. A sale is
listed as pending when the contract has been signed and the transaction
has not closed; pending sales typically are finalized within a month or
two of signing.
An index of 100 is equal to the average level of contract activity during
2001, the first year to be examined, and was the first of five consecutive
record years for existing-home sales.
David Lereah, NAR’s chief economist, said the market has been encouraged
by rising home sales over the last two months. “Home sales rebounded
from the slide that started last fall, but the pending sales data is showing
a dampening effect from rising mortgage interest rates that have been
trending up since January,” he said. “This means a modest
slowing can be expected in the sales pace in the months ahead, although
the market will hold at historically strong levels.”
Regionally, the PHSI in the Northeast rose 5.2 percent in March to 112.9
but was 1.1 percent below March 2005. In the West, the index increased
0.7 percent in March to 111.0 but was 13.3 percent below a year ago. The
index in the South eased 1.2 percent to 127.9 in March and was 1.6 percent
lower than March 2005. The index in the Midwest fell 7.4 percent to 106.1
in March and was 9.3 percent below a year ago.
* The Pending Home Sales Index is based on a large national sample, typically
representing about 20 percent of transactions for existing-home sales.
In developing the model for the index, it was demonstrated that the level
of monthly sales-contract activity from 2001 through 2004 closely parallels
the level of closed existing-home sales in the following two months.
Existing-home sales for April will be released May 25; the
next Pending Home Sales Index will be on June 1.