US pending homes sales rise in March, but market is levelling off'

29 April 2013 17:27  [Source: ICIS news]

WASHINGTON (ICIS)--US pending home sales rose in March, but the housing market appears to be levelling off, the National Association of Realtors (NAR) said on Monday.

In its monthly report, the NAR said that its pending home sales index (PHSI) last month rose by 1.5% from the February pace to reach 105.7.

But that is only the third monthly advance in the last six months while the other three months in that period saw declines.

However, the NAR pointed out that the March index reading of 105.7 is nearly seven points higher than the March 2012 measure of 98.8.

But NAR chief economist Lawrence Yun expressed concern that with sales activity experiencing ups and downs over the last half-year, “the market appears to be levelling off”.

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 sales index is seen as a reliable, forward-looking indicator for near-term expectations in the US housing sector.

The index is measured against a 100 baseline set by the NAR in 2001 to represent an average or healthy pace of pending home sales contracts.

“Contract activity has been in a narrow range in recent months,” Yun said, “not from a pause in demand but because of limited supply.”

Yun also said that he expects little movement in the months ahead in the number of contract signings that go on to be sales closings when loan funding is achieved.

Despite continuing record-low interest rates and still-low home pricing, housing availability has been relatively low, in part because many home builders cannot get project development funding from banks.

Although interest rates remain very low, bank lending criteria continue to be extremely tight, meaning that many home builders – most of whom would qualify as small businesses – are unable to qualify for loans. Home builders' confidence in the market fell in April for the third straight month.

But Yun said that he expects sales closings will edge up modestly as this year progresses. “Job additions and rising household wealth will continue to support housing demand,” he said.

He said that the NAR expects existing home sales to increase by as much as 7% this year compared with 2012 and reach a full-year sales pace of nearly 5m units.

Annual sales of existing homes were as high as 6.5m units in the years before the subprime mortgage crisis, the housing market collapse and the following 2008-2009 recession. Annual sales fell to less than 4.4m in the wake of the recession.

The US housing sector, especially new home construction, is a key downstream consumer industry for chemicals and resins.

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

By: Joe Kamalick
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