Pending Home Sales Slip In May

The housing market took a breather in April.

After forging past its benchmark value of 100 in March, April’s Pending Home Sales Index dropped back to 95.5, its lowest reading of the year. The data suggests fewer home resales throughout Colorado and nationwide in the months ahead.

A “pending home” is a home under contract to sell, but not yet closed. The Pending Home Sales Index is tracked and published monthly by the National Association of REALTORS®.

As a housing market indicator, the Pending Home Sales Index is fundamentally different from other housing metrics which often make headline news.

Unlike the Existing Home Sales report, for example; or the New Home Sales report, the Pending Home Sales Index is purported to be predictor of future housing market performance. It measures the number of homes newly under contract in a given month and, because we know that 80% of homes under contract close within 60 days, the Pending Home Sales Index can foreshadow what’s next for housing.

Other housing market metrics report on events which have already occurred.

Based on April Pending Home Sales Index, therefore, buyers and sellers should expect to see a pull-back in closed home sales through May and June. However, like everything in real estate, home sales remain a local market.

Even by region, performance varied :

Northeast Region : +0.9% from March 2012
Midwest Region : -0.3% from March 2012
South Region : -6.8% from March 2012
West Region : -12.0% from March 2012

Despite three regions posting losses, it’s worth noting that, on an annual basis, all four regions showed gains, led by the Midwest at 23 percent.

If you’re shopping for homes right now, the Pending Home Sales Index suggests that the current market may be “soft”, a scenario which can create ideal home-buying conditions. With mortgage rates low, home affordability has never been higher.