A Sign of Housing Market Weakness: Pending Home Sales Drop in January
Fewer Americans signed contracts to buy previously owned homes in January, an indication of lingering weakness in the national and Florida housing markets.
An index of signed purchase agreements fell 4.1 percent, the National Association of Realtors said today in Washington. The index was 8.9 percent below the year-earlier level.
Today’s report, along with recent ones showing declines in new home sales and Florida mortgage applications during January, show any housing recovery may be gradual. January’s weakness follows a jump in home resale contracts during December, prompted in part by unseasonably warm weather, economists said.
“We had quite a significant bounce in December, so the pullback in January is offsetting that,” said Carolyn Kwan, an economist at Scotia Capital Markets in Toronto. “The initial parts of the housing market slowdown are over but we still have a lot more to see in other areas.”
The index fell to 108.7 in January after rising a revised 4.5 percent in December to 113.3. A year earlier, the January index was 119.3, before the Florida mortgage slowdown truly took shape.
Economists projected the index would drop 1.2 percent after an originally reported 4.9 percent increase in December, according to the median of 19 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 3.5 percent to a gain of 3 percent.
The Realtors’ group reported last week that sales of previously-owned homes rose more than forecast in January to a seven-month high. Home sales for January rose 3 percent to a 6.46 million annual rate.
Leading Indicator
The index of pending home resales is considered a leading indicator of sales because it tracks contract signings. The Realtors’ sales report tracks closings, which typically occur a month or two later.
The existing-home sales report is based on a sample of about 40 percent of transactions in the multiple listing service used by real estate agents, while the pending-sales index covers about 20 percent.
Other reports suggest weakness in the housing market persists. New-home sales, which are also based on signings and make up about 15 percent of the housing market, fell last month by the most in 13 years, to an annual rate of 937,000, the Commerce Department said on Feb. 28.
Hovnanian Enterprises Inc., the seventh-largest U.S. home builder, said Feb 27 that the number of sales contracts signed in its fiscal first quarter was 23 percent below a year earlier and its cancellation rate was 36 percent.
