An index measuring pending home sales fell 5.5 percent from March to April but was still up 14.4 percent from the same time a year ago, according to an index maintained by the National Association of Realtors.
The dip in NAR’s Pending Home Sales Index broke a three-month string of month-over-month gains, but pending sales have posted annual gains for 12 months in a row, said NAR Chief Economist Lawrence Yun.
"Housing market activity has clearly broken out at notably higher levels and is on track to see the best performance since 2007," Yun said in a statement. "All of the major housing market indicators are expected to trend gradually up, but a new federal budget must be passed before the end of the year for the economy to continue to move forward."
NAR’s Pending Home Sales Index, a gauge of homes that are under contract but have not closed, fell from 101.1 in March to 95.5 in April. An index of 100 is equal to the average level of contract activity during 2001, which "coincides with a level that is historically healthy," NAR said.
Lower inventory supplies point to a 2 to 3 percent increase in median home prices this year and a 4 to 5 percent gain in 2013, with wide local market variations," NAR said in an updated forecast. (The latest numbers from S&P/Case-Shiller show national home prices hit a new low for the downturn during the first quarter of this year.)
NAR economists expect existing-home sales will total 4.66 million this year, up more than 9 percent from 2011, and hit 4.92 million in 2013. If lenders relax underwriting standards and bring them back in line with historical norms, NAR thinks existing home sales could grow to 5.3 million next year.
Like economists at Fannie Mae, Yun and his team will be keeping a close eye on budget talks as the U.S. once again approaches its debt ceiling. If lawmakers can’t come to an agreement, more than $1 trillion in automatic spending cuts are set to begin taking effect at the end of this year.
A "fiscal cliff scenario" of higher taxes and sharp spending cuts beginning in early 2013 would lower NAR’s projections for 2013 existing-home sales to 4.5 million. The prospect of such an event is "unlikely" but "still worth noting," NAR said.
In a May 10 monthly outlook report, Fannie Mae economists Doug Duncan and Orawin T. Velz said the debate over raising the debt ceiling is "likely to weigh heavily on financial markets and consumer confidence, potentially dampening growth late in the year."
Members of a Federal Reserve committee that determines monetary policy are also worried that uncertainty over the budget could lead businesses to defer hiring and investment, according to minutes of the federal open market committee’s April meeting.