Pending home sales plunge

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Pending home sales plunge

By HBSDealer Staff - 04/29/2020
Pending home sales saw a steep decline in March, according to the latest Pending Home Sales Index (PHSI) released today by the National Association of Realtors (NAR).

The PHSI for March decreased 20.8% to 88.2. Year-over-year contract signings declined 16.3%.

Pending home sales fell in all four regions in a month-over-month and year-over-year basis. (Graphic courtesy of the National Association of Realtors).

An index of 100 is equal to the level of contract activity in 100. A leading indicator for the housing sector, the PHSI is based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

“The housing market is temporarily grappling with the coronavirus-induced shutdown, which pulled down new listing and new contracts,” said Lawrence Yun, NAR’s chief economist. “As consumers become more accustomed to social distancing protocols, and with the economy slowly and safely reopening, listings and buying activity will resume, especially given the record low mortgage rates.”

Regional results for March are as follows:

  • The Northeast PHSI dropped 14.5% to 82.3 in March, 11% lower than a year ago.

  • The Midwest PHSI decreased 22.0% to 85.6 last month, down 12.4% from March 2019.

  • The PHSI in the South sank 19.5% to an index of 103.7 in March, a 17.8% drop from March 2019.

  • The PHSI in the West fell 26.8% in March 2020 to 71.4, down 21.5% from a year ago.

Any hopes of a big comeback making up for lost sales, following the height of the COVID-19 crisis in the United States, is not likely.

“The usual spring buying season will be missed, however, so a bounce-back later in the year will be insufficient to make up for the loss of sales in the second quarter,” Yun said. “Overall, home sales are projected to have declined 14% for the year.”

Citing results from NAR’s April 19 – 20 Flash Survey, Yun says technology tools such as virtual tours and e-signings are helping connect buyers and sellers. About 58% of realtors reported that buyers are using virtual tours and 43% said buyers have taken advantage of e-closings.

“Although the pandemic continues to be a major disruption in regards to the timing of home sales, home prices have been holding up well,” Yun said.

Noting the ongoing housing shortage, Yun says that home prices are likely to squeeze out a gain in 2020 to a new record high.

“I project the national median home price to increase 1.3% for the year, though there will be local market variations and the upper-end market will likely experience a reduction in home price.”