The Housing Recovery Hits Another Speed Bump
The real estate market has rebounded from the worse levels of the credit crisis in recent years, but the latest report on pending home sales missed expectations.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, edged 0.3 percent higher to 106.0 in April, compared to 105.7 in March, according to the National Association of Realtors. Although the index is now at its highest level since April 2010, analysts were expecting a gain of 1.1 percent.
Compared to last year, the index is 10.3 percent higher. Pending sales have now been above year-ago levels for 24 consecutive months. An index reading of 100 equals the average level of contract signings during 2001.
Despite the disappointing number, a low supply of houses will help keep home prices elevated. Lawrence Yun, NAR chief economist, explains, “The housing market continues to squeak out gains from already very positive conditions. Pending contracts so far this year easily correspond to higher closed home sales in 2013. Total existing-home sales are expected to rise just over 7 percent to about 5 million this year. Because of inventory shortages, higher home sales will push up home values to the highest level in five years.”
Overall, the Pending Home Sales Index was mixed across major regions of the country. The index jumped 11.5 percent to 92.3 in the Northeast, and is 17.7 percent above year-ago levels. In the Midwest, the index increased 3.2 percent to 107.1 in April. However, sales in the South dipped 1.1 percent to an index of 119.2, while the West plunged 7.6 percent to 94.6.
Existing-home sales are expected to increase 6.5 percent to 7 percent this year to approximately 5 million sales. The NAR expects the national median existing-home price to gain about 8 percent and break above $190,000 this year.
Earlier this week, the housing market also hit a speed bump with the latest report on mortgage rates. The average interest rate for a 30-year fixed-rate mortgage came in at 3.90 percent, up for the third consecutive week. That is the highest rate since May 2012. The most recent average rate for a 15-year fixed-rate mortgage also increased to its highest level since August 2012.
In morning trading, home-improvement names such as Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) traded flat. However, home builders such as Toll Brothers (NYSE:TOL), Lennar (NYSE:LEN), and PulteGroup (NYSE:PHM) all traded in the red.
Here’s how the market traded on Thursday:
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