PENDING HOME SALES DROP, ADDING TO THE SEA OF RED THAT IS HOUSING

Takeaway: June pending home sales fell 1.1% m/m, and are down -7.2% year-over-year. The trend in housing data continues to soften.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.

 

The table below has a lot of red on it. The only holdouts remain builder confidence - increasingly at odds with construction activity - and Existing Home Sales - a lagging indicator.

 

PENDING HOME SALES DROP, ADDING TO THE SEA OF RED THAT IS HOUSING - Compendium 072814

 

*Note - to maintain cross-metric comparability, the purchase applications index shown in the table above represents the monthly average as opposed to the most recent weekly data point.

 

 

Today's Focus: June Pending Home Sales Index

The National Association of Realtors (NAR) today released its Pending Home Sales Index for the month of June.

 

Big picture, PHS drops 1.1% (not huge), but as we’ve noted, with cash sales still elevated and the regulation-catalyzed shift in the origination channel ongoing, the truth is probably somewhere in between PHS and Purchase apps. But with Purchase demand sliding further in July, New Home Sales flagging and HPI in full retreat, the broader trend in housing remains one of ongoing softness.

 

Pending Home Sales fell by 1.1% month-over-month to an index level of 102.7 (vs 103.8 in May). For reference, an index value of 100 corresponds to the average level of contract activity in the year 2001. While the sequential decline wasn't especially large at -1.1%, it marks a continuation of the negative year-over-year trends, falling -7.2%. Moreover, it reverses three positive monthly prints in a row. Consider that at this time last year, Pending Home Sales were growing at a rate of +12% y/y and today they're shrinking at -7%. 

 

Geographically, Northeast/South were worse sequentially, West/Midwest better MoM, but all regions remain negative on a YoY basis. 

 

 

PENDING HOME SALES DROP, ADDING TO THE SEA OF RED THAT IS HOUSING - PHS vs Purchase Apps

 

PENDING HOME SALES DROP, ADDING TO THE SEA OF RED THAT IS HOUSING - PHS Index   YoY TTM

 

PENDING HOME SALES DROP, ADDING TO THE SEA OF RED THAT IS HOUSING - PHS LT

 

PENDING HOME SALES DROP, ADDING TO THE SEA OF RED THAT IS HOUSING - PHS Regional June

 

PENDING HOME SALES DROP, ADDING TO THE SEA OF RED THAT IS HOUSING - PHS vs Case Shiller 18mo lag 

 

 

 

About Pending Home Sales:

The Pending Home Sales Index is a monthly data release from the National Association of Realtors (NAR) and is considered a leading indicator for housing activity in the US. It is a leading indicator for Existing Home Sales, not New Home Sales. A pending home sale reflects the signing of a contract, but not the closing of the transaction, which occurs 1-2 months later. The NAR uses data from the MLS and large brokers to calculate the Pending Home Sales index. An index value of 100 corresponds to the average level of activity during 2001.

 

Frequency:

The NAR Pending Home Sales index is released between the 25th and the 31st of each month and covers data from the prior month.

 

Joshua Steiner, CFA

 

Christian B. Drake


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