Steep Decline in Pending Home Sales In April

In a setback to hopes of a recovery in the housing market, the National Association of Realtors reported pending sales of existing U.S homes dropped more than expected in April to a seven-month low.

The National Association of Realtors Pending Home Sales Index dropped 11.6 percent to 81.9 in April, the lowest since September. The index, which tracks agreements to purchase homes, had increased the two previous months. A reading of 100 refers to the level of sales in 2001.

March’s reading was revised down to 92.6 from an original reading of 94.1.

Comments from industry watches on latest April's drop.

Adrian Miller, senior vice president, Miller Tabak:
“What can you say about the housing market that hasn’t already been said? Sales will continue to underwhelm at best and be outright horrible at worst as the decline in prices remains unabated. As long as we have a supply overhang of 6.5 months of new homes, 9.2 months of existing homes and an estimated 3.87 million of homes as part of the so called “shadow inventory” tied to foreclosures, home prices have no catalyst to begin to improve. Look for the housing market to remain stuck in the mud for the foreseeable future, which could mean another two years.”

Michael Gapen, economist, Barclays Capital:
“The decline was much worse than our forecast (+1.0%) and consensus expectations (-1.0%). … The much weaker-than-expected reading likely reflects the effects of adverse weather in many parts of the country. The large declines in the Midwest and South are consistent with the severe weather that hit that region of the country, producing record numbers of tornadoes and significant wind and flood damage. This report foreshadows weakness in upcoming existing home sales, as pending home sales normally transition into sales with a lag of one to two months.”

Daniel Oppenheim, analyst, Credit Suisse:
“They key is that weak sales at the end of the spring selling season will likely lead to even further pricing pressure in the coming months, which in turn will pressure homebuilders to cut prices, or lose more sales.”

Adam Rudiger, analyst, Wells Fargo:
“Overall, we believe this is just one more data point, on top of a multitude of others, that the housing market remains weak (both in the existing and new market) and that 2011 has not yet been the turning point for which some might have hoped.”