The number of U.S. homes in contract fell to the lowest point in 20 months last month. Unseasonably cold weather and low home inventory may have temporarily slowed housing growth nationwide.
For home buyers, the drop may present an opportunity. Homes had sold quickly through most of 2013 so the rapid, year-end slowdown may help give buyers leverage. Plus, mortgage rates have been dropping. Today’s rates are their lowest in more than 10 weeks.
The spring market looks ripe to rebound. The best deals of this year, then, may be the ones you find today.
Pending Home Sales Index : A “Future” Housing Indicator
The Pending Home Sales Index (PHSI) is a monthly report, published by the National Association of Realtors® (NAR). It measures homes under contract, and not yet closed.
The Pending Home Sales Index is unique among the “common” housing market metrics. Whereas most metrics report on how the housing market did perform, the Pending Home Sales Index reports on how the housing market will perform. The index is “forward-looking”.
This is because, according to the National Association of Realtors®, 80% of homes under contract “close” within 2 months.
In this way, the Pending Home Sales Index is correlated to the Existing Home Sales report. Homes under contract become homes sold. We should expect the February Existing Home Sales report, then, to show a similar drop-off as last month’s Pending Home Sales Index.
In December, the Pending Home Sales Index slipped 9% to reach 92.4. The drop marks the largest one-month change since May 2010, which was the month after the end of that year’s federal home buyer tax credit.