Pending home sales dropped anew in April 2020, marking its second straight decline, but the prospects of increased buying activity in the coming months are high, the latest NAR report says.
The Pending Homes Sales Index, according to the National Association of Realtors report, has dropped 21.8 percent to 69.0 in April. The contract signings, on the other hand, was down 33.8 percent year-over-year.
All regions have recorded a year-over-year decline in pending home sales transactions and a month-over-month decline in contract activity. The Northeast region recorded the biggest drop in pending home sales month-over-month with 48.2 percent to a seasonally adjusted annual rate of 42.6. Year-over-year, the Northeast dropped 52.6 percent.
The West region follows with 20 percent to 57.1, while the year-over-year decline was 37.2 percent. Meanwhile, the Midwest (72.0) and South regions (87.6) also dropped from one month ago by 15.9 and 15.4 percent, respectively. Year-over-year, the Midwest declined 26.0 percent; the South region also fell 29.6 percent from the same period last year.
The sales figures have plunged to their lowest levels since January 2001. However, NAR chief economist Lawrence Yun is optimistic that pending contracts will recover after the April decline and that closed sales will bounce back from its May 2020 level.
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The real estate industry remains hot at affordable price points, Yun added, and the coming months may see homebuyers returning in the market despite the social distancing measures in place. The month-over-month decline of the four regions in April is also lower than in March, which is a good sign.
The report noted that NAR's 2020 Flash Survey from May 17 to18 reflected the member realtors' ability to close transactions amid the changes in real estate transaction procedures. Thirty-four percent of respondents said they could complete almost every aspect of transactions while observing social distancing. Also, 46 percent of those who took the survey said they experienced no closing delays attributable to the coronavirus pandemic.
The housing market did not perform as bad as what analysts have expected. Thus, the outlook for home sales and prices for the rest of 2020 has been upgraded, Yun said. Home sales for the remainder of 2020 are predicted to drop by just 11 percent from the previous projection of -15 percent growth, while the median home price is expected to rise by 4 percent from the previous forecast of 0% growth.
The purchase demand got a boost from declining mortgage rates as the 30-year fixed-rate mortgage further dropped to 3.15 percent for the week ending May 28, 2020. The mortgage rate decline is the lowest level it has dropped since 1971, according to Freddi Mac.
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The PHSI is a forward-looking indicator of housing activity and is based on signed family homes, condos, and co-ops contracts. A PHSI index of 100 means it is of the same level of contract activity in 2001. The Pending Home Sales Index used a national sample representing about 20% of existing-homes sales transactions.
The NAR flash survey had 3,236 usable responses with a 3.4 response rate. Ninety-four percent of those who responded said they conduct mostly residential business while four percent conduct mostly commercial business.
