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Pending Home Sales Plunge Another 3.9 Percent, Down for Six Consecutive Months

Pending home sales, a gauge of existing home sales in progress, is down for the sixth month, and a whopping eleven months year-over-year.
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Pending Home Sales Courtesy of the NAR and Trading Economics 

Pending Home Sales Courtesy of the NAR and Trading Economics 

Understanding Pending Sales

New home sales are recorded at contract signing but existing home sales at closing. The pending home sales index is a gauge of future existing home sales reports.

The National Association of Realtors reports Pending Home Sales Descend 3.9% in April

Key Points

  • The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, slid 3.9% to 99.3 in April. 
  • This was the 6th consecutive month of lower sales.
  • Year-over-year, transactions fell 9.1%, the eleventh month of lower sales. 

Pending Home Sales Year-Over-Year 

Pending Home Sales Courtesy of the NAR and Trading Economics 

Pending Home Sales Courtesy of the NAR and Trading Economics 

Going to Get Worse 

Ignoring the brief Covid-related downturn, we have not seen a dip like this since 2011. 

But it's going to get worse. 

NAR Pending Home Sales Data Provides More Evidence of a Severe Housing Slump

On May 23, I commented NAR Pending Home Sales Data Provides More Evidence of a Severe Housing Slump

Active listings are down and pending listings of all contracts are down 17.4%

  • Based on preliminary data, new contracts signed decreased 11.7% on a year-over-year basis while new pending listings increased 1.1%.
  • The inventory of pending listings (all contracts signed) was down 17.4% from one year ago, while the inventory of active listings fell at a lower rate of 4.2% from one year ago. 

New Home Sales Plunge 22.5% In April, 16.6% From Deep Negative Revisions

In case you missed it, please see New Home Sales Plunge 22.5% In April, 16.6% From Deep Negative Revisions

On May 19th I noted Existing Home Sales Skid to Pre-Pandemic Level, a Housing Bust is Underway

Relative Economic Activity Importance

  • New home sales are an indication of family formation, but for current economic impacts, existing home sales are far more important because they dwarf new home sales. 
  • The current seasonally-adjusted annualized rate of new home sales is 591 thousand. 
  • The current seasonally adjusted annualized rate of existing home sales is 5.61 million. 

Reflections on Inventories, Retail Sales, and Durable Goods 

Inventories and sales data from the commerce department, chart by Mish

Inventories and sales data from the commerce department, chart by Mish

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This morning I noted Inventories Look Historically Lean Compared to Sales, But Appearances Deceive

Here is one key point. 

"A lot of items in excess inventory are seasonal & big-ticket. Rather than heavy discounting, we are more likely to warehouse these goods until they sell. It will mean slower shipping volumes, probably most notable in Q4/Q1."

I asked, Really!? 

This morning, Craig Fuller made a second pertinent Tweet that I added to my post.

Pent Up Demand In Reverse

When people buy new and existing homes, especially the latter, they buy appliances and remodel.

Remodeling includes new appliances, landscaping, furniture, kitchen cabinets, paint, etc. 

Demand for those items is guaranteed to plunge. This is happening just as ports are opening up in China. 

We are going to see price deflation in goods. But what about food, energy, and rent? 

Can the Fed reduce demand for food, energy, or rent? 

The answer is no, partially, and no. 

I discussed this previously in Food, Rent, and Energy Prices are Totally Outside the Fed's Control

"Totally" is incorrect.

Energy is partially in the Fed's control. People will still drive to work and heat their homes, and the Fed cannot control the war in Ukraine or other supply disruptions.

But if the Fed crushes the stock market, recreational demand for energy will drop. And energy used in the production of goods will also fall. 

Rent has the biggest influence on the CPI. I will discuss rent in more detail in a future post.

This post originated at MishTalk.Com.

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