Pending Home Sales Index Continues to Increase

WASHINGTON D.C. — Pending home sales, a leading indicator for the housing market, have risen to the third highest level on record, according to a report released Monday by the National Association of Realtors.

The Pending Home Sales Index, based on data collected for June, rose 0.6 percent to a reading of 126.3, and is 3.6 percent higher than June 2004.

The index is based on pending sales of existing homes, including single-family and condominiums. A sale is pending when the contract has been signed but the transaction has not closed. Pending home sales typically close within one or two months of signing.

David Lereah, NAR’s chief economist, said the index shows historic levels of home sales will continue in the near future.

“Existing-home sales will stay in record territory for transactions in July and August,” he said. “There is some volatility to the index due to the short history of seasonal factors, so we’re not predicting another record month, but it certainly is possible.”

Regionally, the PHSI in the West increased 3.5 percent to 128.9 in June and was 7.3 percent higher than June 2004. The index in the Midwest rose 0.7 percent to 116.3 in June, but was 1.7 below a year ago. In the South, the index increased 0.4 percent to 138.0, and was 6.0 percent higher than June 2004. The Northeast index fell 3.2 percent to 113.2 in June, but was 0.9 percent higher than a year earlier.

According to the NAR, an index of 100 is equal to the average level of contract activity during 2001, the first year to be analyzed. Year 2001 sales are fairly close to the higher level of home sales expected in the coming decade relative to the norms experienced in the mid-1990s. As such, an index of 100 coincides with a historically high level of home sales activity.