On July 8, the National Association of Realtors® released its Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in May. The PHSI fell 4.7 percent to 84.7 from an upwardly revised reading of 88.9 in April, and remains 14.0 percent below May 2007 when it stood at 98.5. Lawrence Yun, NAR chief economist, confirmed that these numbers are another indicator that “we are not out of the woods by any means.” Read the NAR Press Release. The PHSI is a leading indicator for the housing sector, based on pending sales of existing homes. The PHSI was developed by the National Association of Realtors® during the housing boom and does not have a long-track record for predicting housing trends, but it does make some sense. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons. An index of “100” is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales. According to the press release issued by NAR, the PHSI in the Western Region of the U.S. (which includes Arizona) for May slipped 1.3 percent to 97.5 (so slightly below the activity level of 2001) but is 2.0 percent higher than May 2007. In the Northeast, the index declined 2.9 percent to 77.0 in May and is 16.4 percent below a year ago. The index in the Midwest fell 6.0 percent to 78.6 and is 13.8 percent below May 2007. In the South, the index dropped 7.1 percent in May to 84.5 and is 22.1 percent below a year ago. Economist Yun said location has never mattered more than in the current market. “Some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half. Price conditions vary tremendously, even within a locality, depending upon a neighborhood’s exposure to subprime loans.” Worthy of local note for you Flagstaff real estate statistical junkies, the Arizona Daily Sun today published in its print edition a chart from the Northern Arizona Association of Realtors® showing first quarter statistics from the Association’s MLS database. That Northern Arizona MLS covers a huge region of Northern Arizona – from Stoneman Lake and Sedona in the south to Ashfork in the west to Winslow in the east and to the Grand Canyon in the north. I can’t find the chart on line to share with you here, but my reaction to it was that it was basically meaningless. It showed nothing about the search criteria used to develop the average or median sales prices and it failed to show the total number of sales in its year-to-year comparisons. As Yun says, you need to know the location when you are looking at real estate numbers make them meaningful. Also, the price comparisons year-to-year are less meaningful if you can't also see the huge drop in total sales that our market has experienced because prices have not fallen as far as they need to yet. When I run market snapshots for this blog and my print newsletter, I do the Flagstaff city regions combined with the immediately surrounding areas that are realistic alternatives for people who want to be called Flagstaff residents – Ashfork doesn’t count, nor even does Williams. Locally, a run today of the Flagstaff metro market, as described above, shows that 1140 homes are actively for sale. There are 163 pending contracts in the Flagstaff market. If those contracts close over the next 30-60 days, we would be right about in the same boat we’ve been in for the last few months in terms of Flagstaff real estate market activity. |
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