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Economy in Brief

U.S. Pending Home Sales Rise For A Second Month
by Tom Moeller May 4, 2009

For March, the National Association of Realtors reported that pending sales of existing homes rose another 3.2% following their little revised 2.0% gain during February. While surprising, the gains failed to recoup a sharp 7.7% decline during January. Therefore, for the first quarter as a whole, sales fell 3.8% to a new series low. Consensus expectations had been for no change in March sales versus February.

Last month's gain in home sales was contained to just South (+7.7% y/y) and the West (+1.6%). Elsewhere, sales in the Northeast remained quite weak and fell month-to-month (-24.2%) while sales in the Midwest slipped 1.0%. Year-to-year, however, sales in the Midwest have rebounded 8.3%.

The home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.

The latest monthly gains in home sales have been accompanied by a rise in home prices. The median sales price of an existing home rose 4.2% in March (-12.4% y/y). The increase was the second consecutive gain but it followed seven straight months of decline. Prices were down by one quarter from their peak during June 2007. The latest gains in home prices did lower housing affordability slightly but the decline has been small. Therefore, combined with lower interest rates, the affordability index of a home remained up by 22.7% year-to-year and by three quarters from the 2006 low. The latest level was a record high for the series which extends back to 1970.

Weak home sales are encouraging potential sellers to keep their homes off the market. The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale fell 9.3% during March versus one year earlier.

At the current sales rate there was a 9.8 months' supply of homes on the market and there was a 10.4 months' supply during all of last year, up from the 8.9 months supply during 2007 and 6.5 months during 2006. For single family homes, there was a 9.3 months' supply in February versus a full-year figure of 10.0 months during 2008.

The pending home sales data are available in Haver's PREALTOR database. The number of homes on the market and prices are in the REALTOR database.

Pending Home Sales (2001=100)  March February Y/Y 2008 2007 2006 
Total 84.6 82.0    1.1% 86.8 95.8 112.1 
  Northeast 59.5 63.1 -24.1 72.6 85.6 98.5
  Midwest 82.3 83.1 8.3 80.6 89.5 102.0
  South 93.2 85.9 7.7 89.8 107.3 127.3
  West 93.1 89.6 1.6 99.3 92.1 109.5
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