October 2014 Pending Home Sales Index Declines But Continues To Show Improving Home Sales

The National Association of Realtors (NAR) seasonally adjusted pending home sales index declined marginally – but remains in expansion for the second month after a year in contraction. Our analysis of pending home sales however suggests that November 2014 existing home sales will be better than October’s.

Pending home sales are based on contract signings, and existing home sales are based on the execution of the contract (contract closing).

The NAR reported:

Pending home sales index was down 1.1% month-over-month and up 2.2% year-over-year.

The market was expecting month-over-month growth of -1.0% to 2.0% (consensus 0.6%) versus the growth of 2.2% reported.

Econintersect‘s evaluation of the unadjusted data shows:

the index growth decelerated 1.1% month-over-month and up 2.2% year-over-year.

The current trends (using 3 month rolling averages) improved – and are now in expansion.

Extrapolating the unadjusted data to project November 2014 existing home sales, this would be a 5.6% expansion year-over-year for existing home sales.

After 28 months of year-over-year growth followed by 11 months of contraction, pending home sales according to the unadjusted data has finally moved into expansion territory for the last two months.

Unadjusted 3 Month Rolling Average of Year-over-Year Growth for Pending Home Sales (blue line) and Existing Home Sales (red line)

From Lawrence Yun , NAR chief economist:

…. despite October’s modest decline, contract signings have remained at a healthy pace now for six straight months. In addition to low interest rates, buyers entering the market this autumn are being lured by the increase in homes for sale and less competition from investors paying in cash. Demand is holding steady but would be more robust if it weren’t for lagging wage growth and tight credit conditions that continue to hamper those individuals looking for relief from rising rents.

…. evidence of rising home prices allowing more willing homeowners the ability to sell can be found in NAR’s annual survey released earlier this month, which revealed that the typical seller over the past year was in their home for 10 years before selling—an all-time survey high for tenure of home.