Pending Home Sales Down 1% In August

The outlook for the used home market remains stubbornly flat, with pending home sales down a disappointing 1.0 percent in August. The Econoday consensus was calling for a 0.8 percent gain. Year-on-year, pending home sales in August were down 2.2 percent which is roughly in line with a 5.3 percent decline for final sales of existing homes in data that were released last week.

A lack of first-time buyers and strong demand for rentals remain key obstacles for home sales. A lack of distressed homes on the market is another negative factor. Mortgage rates for now are still low but are likely to begin to rise as the Fed withdraws stimulus and begins to raise rates, a prospect that points to continued sales weakness ahead.

Regionally, weakness in sales trends for existing homes has been spread evenly with the West lagging slightly. Weakness in today's report is centered in the Midwest where pending sales fell 2.1 percent for a year-on-year decline of 7.6 percent. The Northeast shows an even steeper 3.0 percent decline in the month though it is the only region with a positive year-on-year rate at plus 1.6 percent. Pending sales rose 2.6 percent in the West though the year-on-year is minus 2.6 percent while the South, which is by far the largest housing region, shows a 1.4 percent decline in the month and no change on the year.

The pending home sales index for July posted a very strong 3.3 percent rise to 105.9. Regional data showed convincing gains led by the Northeast at 6.2 percent in the month followed by the South, at 4.2 percent, and the West at 4.0 percent. The Midwest was the only region in the minus column, and only at 0.4 percent.