Pending Home Sales in April fell 5.5%, well below expectations of flat m/o/m and comes after a cumulative gain of 16.3% in the warm fall/winter months of Oct thru Mar. Contract signings fell the sharpest in the still over inventoried areas of the South and West. Sales rose slightly in the Northeast and fell a touch in the Midwest. Bottom line, April contract signings likely reflected give back from an unusual winter and the 5.5% drop m/o/m is close to matching the fall in purchase applications within the weekly MBA data of 6.7% in April from March.

Category: MacroNotes, Think Tank

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2 Responses to “Pending home sales drop 5.5% m/o/m”

  1. VennData says:

    Up nearly 15% y-o-y.

  2. Woj says:

    Following yesterday’s Case-Shiller Home Prices report, which showed m/o/m gains but further y/o/y declines, many analysts were out once again touting the bottom in housing (e.g. House Prices: From “bold call” to consensus in four months). Despite the pervasive optimism, I remain in the camp that believes these calls will continue to be proven wrong, as they have been each of the past couple years. Steve Keen in a Correction to “What House Price Falls Really Look Like” offers the following chart on real US house prices over time:

    Although prices, even nominally, have fallen pretty dramatically in the past several years, real prices remain 15% above their long-term average. Anyone who has studied the history of bubbles will recognize that prices practically always fall below the long-term average before rebounding (otherwise the long-term average would be far higher).

    Based on estimates by the Cleveland Fed, expected inflation for the next 10 years is only 1.38%. If such low values of inflation are realized, to simply reach the long-term real price average, nominal home prices must either stagnate for another decade or continue to drop for the next several years. While nominal housing prices may be bottoming, in my view, a real recovery still remains years away.