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Economy in Brief

March Pending Home Sales Drop to Lowest Level in Nine Years
by Gerald D. Cohen  April 29, 2020

• Pending home sales fell 20.8% in March to its lowest level since May 2011.

• Prospective sales declined at double-digit rates in all regions of the country.

• Mortgage applications suggest substantial weakness ahead.

The National Association of Realtors (NAR) reported that pending home sales plummeted 20.8% in March (-21.5% year-on-year). This is the second largest monthly decline since this series began in 2001 – the record drop occurred when the First-Time Homebuyer Credit was expiring in 2010 – and took the level of future sales to its lowest level since May 2011. Unfortunately, indications such as the over 30% y/y drop in the Mortgage Bankers Association index of loan applications for home purchase in April, suggest substantial weakness in housing activity going forward.

The number of signed contracts in March decreased at double-digit rates in every region of the country, led by a 26.8% drop in the West (-21.5% y/y). Pending sales fell 22.0% in the Midwest (-12.4% y/y), 19.5% in the South (-17.8% y/y) and 14.5% in the Northeast (-11.0% y/y)

The pending home sales index measures sales at the time the contract for an existing home is signed, analogous to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity anticipates the level of closed existing home sales in the following two months. The series dates back to 2001, and the data are available in Haver's PREALTOR database. Mortgage interest rates from the Mortgage Bankers Association can be found in the SURVEYW database.

Pending Home Sales (SA, % chg) Mar Feb Jan Mar Y/Y % 2019 2018 2017
Total -20.8 2.3 5.3 -21.5 1.1 -4.1 -0.8
   Northeast -14.5 2.8 2.2 -11.0 0.8 -5.0 0.6
   Midwest -22.0 4.2 7.4 -12.4 -0.3 -4.6 -2.5
   South -19.5 -0.2 8.5 -17.8 1.8 -1.9 0.6
   West -26.8 5.1 -0.9 -21.5 1.3 -7.3 -2.5
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