United States (US) pending home sales reduced 5.5 percent to 95.5 in April 2012 following three months of increases, according to the National Association of Realtors (NAR) on Wednesday. The Pending home Sales Index is a forward looking indicator that measures contracts but not closings. Despite the monthly dip in April 2012 the estimate resulted notably higher than the figure in April 2011 at 83.5. Lawrence Yun, NAR chief economist commented that a one-month setback among many months of increases would not change the fundamental improvements in housing market conditions. “Home contract activity has been above year-ago levels now for 12 consecutive months. The housing recovery momentum continues,” Yun stated.
“Housing market activity has clearly broken out at notably higher levels and is on track to see the best performance since 2007,” Yun added.
Additionally, NAR upgraded the housing forecast with existing home sales expected to reach 4.66 million in 2012, after 4.26 million in 2011. Furthermore, the expectation for 2013 is 4.92 million, although could vary significantly if on two different scenarios occur: if lending returns to normal the 2013 estimate for existing home sales is 5.3 million; if higher taxes and sharp spending cuts begin at the beginning of next year, a less likely scenario, then the level is projected to attain 4.5 million.
Furthermore, due to lower inventory levels, the forecast for home prices has been revised upward with prices expected to increase 2-3 percent and 4-5 percent in 2013 with wide variations between markets.
The EURUSD dropped further as markets lost confidence in the housing market recovery in the US. In addition to that, news of banking trouble in Spain caused the Dow to end down 161 points. We expect the EURUSD to target the next level of support near 1.2175 in the coming days.
Eugene Ross, Analyst
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