by Calculated Risk on 3/27/2014 10:00:00 AM

From the NAR: February Pending Home Sales Continue Slide

The Pending Home Sales Index, a forward-looking indicator based on contract signings, dipped 0.8 percent to 93.9 from a downwardly revised 94.7 in January, and is 10.5 percent below February 2013 when it was 104.9. The February reading was the lowest since October 2011, when it was 92.2.
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The PHSI in the Northeast declined 2.4 percent to 77.1 in February, and is 7.4 percent below a year ago. In the Midwest the index rose 2.8 percent to 95.3 in February, but is 8.5 percent lower than February 2013. Pending home sales in the South fell 4.0 percent to an index of 106.3 in February, and are 9.3 percent below a year ago. The index in the West increased 2.3 percent in February to 86.1, but is 16.5 percent below February 2013.

A few comments:
• Mr. Yun once gain blamed some of the weakness on the weather (the weather was unusually bad again in February), but the index remained weak in the South too (down 9.3% year-over-year and probably not weather), and in the West (down 16.5% year-over-year partially related to low inventories).

• My view is there were several reasons for the decline in this index: weather in some areas, fewer distressed sales, less investor buying, fewer "pending" short sales, and low inventories.  I think fewer distressed sales, fewer "pending" short sales, and less investor buying are all signs of a healthier market - even if overall sales decline.

• Mr Yun's forecast for 2014 is 5.0 million existing home sales, down from his earlier forecast of 5.1 million existing home sales this year. I'll take the under on his current forecast, and I think it would be a positive sign if sales were under 5 million in 2014 as long as distressed sales continue to decline and conventional sales increase.

• Of course, with housing, what really matters for the economy and employment is new home sales and housing starts, not existing home sales.

Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in March and April.