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August Pending Home Sales Dip After July’s Two-Year Peak: NAR

After reaching a two-year high in July, the Pending Home Sales Index (PHSI) fell in August to 99.2, the lowest level since April, the ""National Association of Realtors"":http://www.realtor.org/news-releases/pending-home-sales-decline-in-august reported Thursday. Analysts had expected the index to rise to 102.2. The index fell in three of the four Census regions.

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The drop in the PHSI followed by one day a report that ""new home sales for August were essentially flat to July"":http://www.themreport.com/articles/report-reveals-year-over-year-rise-in-new-residential-sales-2012-09-26, down 0.3 percent.

The slippage in both the PHSI and new home sales â€" both of which are based on contracts, not completed transactions â€" dampens the outlook for home sales. PHSI data are generally reflected in the report on existing home sales two months out, that is the August PHSI points to weaker homes sales reported for October.

Since April, the PHSI has alternated between rising and falling: down in April, June and August while increasing in May and July. The NAR though pointed to a longer trend: even with the August drop, the index is up 10.7 percent in the last year.

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The drop in the August PHSI follows a string of positive housing indicators: increases in existing and new home sales in July, increases in the Case-Shiller Home Price Indexes for July and continued increases in builder confidence in September and in housing starts in August. Both the median and average price of a new single family rose in August. The only negatives in recent reports were a slight drop in housing permits in August and in the median price of an existing home in August.

The PHSI, according to the NAR, has improved year-year for 16 straight months, up 10.7 percent in August, a slight retreat from July when it was up 12.6 percent year-year.

Regionally the PHSI improved only in the Northeast where it rose 0.9 percent to 78.2 in August and is 19.9 percent above August 2011. In the Midwest the index declined 2.6 percent to 95.0 in August but is also 19.9 percent higher than a year ago. Pending home sales in the South slipped 1.1 percent to an index of 110.4 in August but are 13.2 percent above August 2011. In the West, the index fell 7.2 percent in August to 102.5 and is 4.2 percent below a year ago, attributable, NAR said, to ""broad inventory shortages.""

""The performance in month-to-month contract signings has been uneven with ongoing shortages of lower priced inventory in much of the country, and across most price ranges in the West,"" according to NAR chief economist Lawrence Yun.

The index is based on a large national sample, representing about 20 percent of transactions for existing-home sales. 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; it coincides with a level that is historically healthy.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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