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Modest Gain in Pending Home Sales08-31-15 | News

Modest Gain in Pending Home Sales
Index is 0.5 Percent Higher in July

The Pending Home Sales Index barely budged upward in July, but it is the 11th month in a row that its readings have gone higher on a year-to-year basis. The PHSI has also increased for the sixth time in the last seven months.

Even though the Pending Home Sales Index increased less than one percent in July, it has trended upward for 11 months in a row on a year-to-year basis.

The index is based on contract signings and is maintained by the National Association of Realtors, a commercial and residential real estate trade industry organization.

So far this year, July's index result is the third highest of 2015. The Pending Home Sales Index was at 111.6 in April, and at 112.3 in May. It is also the sixth time the index has risen in the last seven months.

The index moved up 0.5 percent to 110.9 in July, from 110.4 in June. It is also 7.4 percent higher than the 103.3 reading in July 2014.

However slight the July reading might be, it still means the housing market begins the second half of 2015 on a positive note.

"Led by a solid gain in the Northeast, contract activity in most of the country held steady last month, which bodes well for existing-sales to maintain their recent elevated pace to close out the summer," Lawrence Yun, chief economist for the NAR, said.

But inventory shortages and escalating home prices could keep the market from really taking off. "While demand and sales continue to be stronger than earlier this year," Yun said, "Realtors have reported since the spring that available listings in affordable price ranges remain elusive for some buyers trying to reach the market and are likely holding back sales from being more robust."

The NAR has predicted that the national median price for existing homes will jump 6.3 percent later in 2015 to $221,400. At the same time, its forecast is for sales of existing homes to climb 7.1 percent to about 5.29 million units. Existing home sales peaked in 2005 with 7.08 million units exchanging hands.

The Pending Home Sales Index, a leading indicator of the housing industry, is based on pending sales of existing homes. Sales are considered pending when contracts are signed but the transactions have not yet closed.

An index of 100 is equal to the average level of contract activity in 2001, the year the Pending Homes Sales Index was formed.

"In light of the recent volatility in the stock market, it's possible some prospective buyers may err on the side of caution and delay decisions, while others may view real estate as a more stable asset in the current environment," said Yun.

But the market as a whole should continue to be bullish for some time.

"The U.S. economy is growing "?u albeit at a modest pace "?u and the labor market continues to add jobs," Yun said. "Uncertainty in the equity markets "?u even if the Fed raises short-term rates in September "?u could stabilize long-term mortgage rates and preserve affordability for buyers."

On a regional scale:
• The PHSI in the Northeast increased 4.0 percent to 98.8 in July. It is 12.1 percent above the reading of a year ago.
• In the Midwest, the index remained unchanged for the month at 107.8. It is 5.7 percent above July 2014.
• Pending home sales in the South climbed 0.6 percent to 124.2 in July. It is 6.5 percent higher on a year-to-year basis.
• The index in the West declined 1.4 percent for the month to 103.0. But it is still 7.5 percent higher than the July 2014 reading.

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