U.S. Pending Home Sales Nose Dive, Down 11.6 Percent in April

The housing market remains vulnerable, and despite previous signs of optimism, data released today suggests that the weakest component of the recovery in the United States has a long road ahead of it. The National Association of Realtors’ report today showed that pending home resales plummeted by 11.6 percent in April, missing the expected decline of 1.0 percent, according to a Bloomberg News Survey. The figure for March was revised down to 3.5 percent from 5.1 percent. On a year-over-year basis, pending home sales have fallen by 26.8 percent since last April. Three of the four regions measured for the data showed declines, with the South falling by 17.0 percent, and the West dropping by 10.0 percent. The National Association of Realtors noted that poor weather may have had a role.

U.S. Pending Home Sales (MoM): May 2008 to Present

Source: Bloomberg

The fact remains that consumers do not like to buy housing in an environment in which banks are unlikely to lend, and furthermore, when house prices continue to plummet – foreclosures continue to bog down the prices of houses –previously owned homes, and thus pending home sales data, will remain depressed.

Concern is likely going to remain, if not increase, after today’s report. The supply of homes as the current sales rate dropped to 6.5 month’s worth in April, from 7.2 in March, the fewest since record keeping began in 1963. Last week, the Commerce Department released a report showing that housing starts fell by 11.0 percent in April to a 523,000 annual pace, the second-weakest reading since the low in April 2009.

In the minutes following the report, the Dow Jones FXCM Dollar Index fell sharply, declining from 9593.41 to as low as 9574.62. At the time this report was written, the index was trading at 9582.02.

Written by Christopher Vecchio, Currency Analyst

To contact the author of this report, please send inquiries to: cvecchio@fxcm.com