Responding to higher mortgage rates, the National Association of Realtors’ (NAR) Pending Home Sales Index (PHSI) slipped 0.4 percent in June to 110.9, the group reported Monday.
Economists had expected the index to drop to 110.7, which would have been a 1.4 percent decline from May’s originally reported 112.3. The May index was revised down to 111.3.
With the revision, the May index, originally reported as the highest in six years, matched the level of April 2010.
The index covered the same month in which new home sales, reported last week by the Census Bureau and HUD, surged to a five year high. New home sales are tracked when buyers sign contracts, just as the pending home sales index is compiled for contracts on existing single-family homes. New home sales rose as prices slipped; prices of existing single-family homes have been increasing even as mortgage rates have also been rising.
Indeed, the higher mortgage rates were seen as one factor in the increase in new home sales as potential purchasers rushed to lock in loans before mortgage rates rose further. That appeared to not be the case with existing homes.
The dip in the June index continued a monthly pattern of alternating increases and decreases in the PHSI, which has increased in odd-numbered months and decreased in even-numbered months since last December, though it also fell in November.
The PHSI is considered an indicator of home sales (closings) reported by the NAR. Existing-home sales fell in June as the PHSI for April dropped. The index rose in March, and home sales increased in May.
Even with the monthly decline, the PHSI was up 10.9 percent over June 2012, the 26th straight month of year-over-year increases. New home sales have been up on a yearly basis for 21 straight months and in 24 of the last 25 months.
The index improved in June in only one of the four Census regions, increasing 3.3 percent in the West to 114.2 on the heels of a 16.8 percent spike in May. The index in the West is up 4.4 percent in the last year.
The index was flat at 87.2 in the Northeast, up 12.2 percent in the last 12 months. The index fell 2.1 percent to 118.3 in the South—up 9.5 percent since June 2012—and dropped 1.0 percent to 114.3 in the Midwest, 19.5 percent ahead of a year ago.
The PHSI is based on a sample of about 20 percent of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, the base year.
By Mark Lieberman