In April, pending home sales in the United States remained unchanged compared to the previous month, according to the National Association of REALTORS® (NAR). While three regions in the U.S. experienced monthly gains, the Northeast region saw a decrease. However, all four regions reported a decline in transactions compared to the previous year.
The Pending Home Sales Index (PHSI), which serves as a forward-looking indicator of home sales based on contract signings, maintained a value of 78.9 in April, showing no change from the previous month. Year-over-year, pending transactions decreased by 20.3%. It’s important to note that an index value of 100 corresponds to the level of contract activity observed in 2001.
NAR Chief Economist Lawrence Yun pointed out that limited inventory is preventing the completion of all potential home purchases. Affordability challenges continue to hinder contract signings, but increasing the housing inventory significantly is crucial to stimulate more movement in the market.
Here’s a breakdown of the regional performance in pending home sales for April:
- The Northeast region’s Pending Home Sales Index (PHSI) dropped 11.3% from the previous month to 59.1, indicating a decline of 21.8% compared to April 2022.
- The Midwest region’s index improved by 3.6% to reach 78.4 in April, but it still represented a decrease of 21.4% compared to the previous year.
- The South region’s PHSI increased slightly by 0.1% to 99.6 in April, but it experienced a decline of 16.7% compared to the prior year.
- The West region’s index saw the highest monthly increase of 4.7% in April, reaching 62.2. However, it recorded the largest year-over-year decline of 26.0% compared to April 2022.
Lawrence Yun mentioned that minor monthly fluctuations in regional activity are typical. However, the cumulative results over several years clearly indicate a much greater number of home sales in the South region.
Notably, the PHSI for the South region is nearly at 100, which is equivalent to the average level of contract activity in 2001 when NAR began analyzing the PHSI. Comparatively, the Midwest’s activity has decreased by 22% since that time, while the Northeast and West regions are both approximately 40% lower than their 2001 levels.
The National Association of REALTORS® is the largest trade association in the United States, representing over 1.5 million members involved in residential and commercial real estate. The Pending Home Sales Index (PHSI) serves as a leading indicator for the housing sector, based on pending sales of existing homes. The index is calculated based on a sample covering about 40% of multiple listing service data each month.
It’s worth noting that the time between pending contracts and completed sales may vary due to factors such as difficulties in obtaining mortgage financing, home inspection issues, or appraisal problems. The PHSI model has demonstrated that the level of monthly sales-contract activity aligns with closed existing-home sales in the following two months.
The upcoming release of Existing-Home Sales for May is scheduled for June 22, while the next Pending Home Sales Index will be published on June 29. Both releases are set for 10 a.m. Eastern Time.