Pending Home Sales Index For May Drops to Lowest Level In History of Index

Dennis Norman

There was no question in my mind that home sales would plummet after the April 30th deadline to buy a home and qualify for the home-buyer tax credit passed, the only question was how bad? Today the National Association of REALTORS released it’s Pending Home Sales Index for May showing a decrease of 30.0 percent in the index from April (seasonally adjusted) and a 15.9 percent increase from May 2009. In my past articles I have spoke of a “sugar-rush” created in the market by the tax credits and the sudden slow-down after that wears off…we are now seeing this. Unfortunately the tax-credits could not ‘fix” the market, it was just a band-aid to spur some activity. The market won’t get fixed until the economy is in better shape; people have jobs and the foreclosure rate drops dramatically.

Here are highlights from the report:

  • May’s pending home sales index (seasonally adjusted) was 77.6 (the index is based upon 100.0 being equal to the average level of sales activity in 2001 which we could call the last “normal” year) which is the lowest level the index has hit since NAR began the index in 2001.
  • May’s not-seasonally adjusted index index was 89.0 a 30.3 percent decrease from April and a 15.6 percent decrease from a year ago.
  • All regions in the U.S. saw month-over-month and year-over-year declines in pending home sales.

Lawrence Yun, NAR chief economist, said “Consumers are rational and they rushed to meet the tax credit eligibility deadline in April. The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June,” he said. “Surprisingly, though, some local markets such as Portland, Maine, and Jacksonville, Fla., actually experienced an increase in contract signings from a year ago without the tax credit.”

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