US April pending home sales drop 11.6%, adding to housing woes

27 May 2011 20:22  [Source: ICIS news]

WASHINGTON (ICIS)--US pending home sales fell sharply in April from March, the National Association of Realtors said on Friday.

The 11.6% decline added to other negative housing sector reports to further dampen recovery hopes.

The association said that its pending home sales index fell to 81.9 for April, down from the revised 92.6 measure recorded in March and fully 26.5% below the 111.5 mark set in April last year.

However, in April 2010, home sales were stimulated by a federal tax incentive that was to expire in May.

But the April decline in the index effectively reverses two successive monthly gains seen in February and March and marks the lowest point since September last year when it was at 79.4.

A residential property sale is listed as “pending” when a contract has been signed but the transaction has not been closed and funded with a mortgage loan. A pending sale usually closes within a month or two of contract signing.

The Association's pending home sales index is seen as a reliable forward-looking indicator for near-term expectations in the crucial US housing sector.

The housing industry is a key downstream consumer for the sector, especially the construction of new homes, which drives demand for a wide range of chemicals, resins and derivative products.

While sales of existing homes do not generate a parallel demand for chemicals, those sales do take homes off the market, reducing the inventory of unsold properties. That, in turn, helps build demand for new residential construction.

Association chief economist Lawrence Yun said that the April drop “is disappointing and implies a slower-than-expected market recovery in upcoming months”.

He attributed the downturn in part to a soft patch in the US economic recovery last month in the face of sharp increases in oil and gasoline prices, a sudden upturn in unemployment claims and widespread, severe rain across much of the country.

Yun also noted that “continuing, excessively tight credit” remained the primary long-term factor that is holding back a housing recovery.

Word of the decline in pending residential property sales came on the heels of a string of negative reports last week on the housing sector. Those included a report on continuing pessimism among home builders who don’t see a recovery anytime soon, a nearly 11% drop in housing starts in April, and a slight downturn in sales of existing homes last month.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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