Pending Home Sales Rise in June

The National Association of Realtors’ Pending Home Sales Index rose in June, potentially signaling a rebound to the nation’s housing industry.

Hope is a four-letter word being bandied about in the housing industry as a result of the latest forecast by the National Association of Realtors.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in June, rose 5.3 percent to 89 from a downwardly revised reading of 84.5 in May, but remains 12.3 percent below June 2007 when it stood at 101.4. This unexpected hike in the index has been attributed, in part, to the recently signed housing stimulus package.

Lawrence Yun, NAR chief economist, said sales have been in a pattern of rising and falling within a fairly narrow range.

“The vacillation of data from one month to the next indicates a housing market in transition,” he said. “The rise in pending home sales was broad-based with all four regions showing gains. This is welcome news because a rise in contract activity is necessary for an overall housing recovery.”

The PHSI in the South jumped 9.3 percent to 92.4 in June but is 16.6 percent below June 2007. In the West, the index rose 4.6 percent to 101.0 in June but remains 1.7 percent below a year ago. The index in the Northeast increased 3.4 percent to 79.6 but is 15.4 percent below June 2007. In the Midwest, the index rose 1.3 percent in June to 79.6 but is 13.3 percent below a year ago.

Sales gains have been consistently strong in recent months in Sacramento, Calif.; Las Vegas; and Ft. Myers, Fla., where affordability conditions have greatly improved.(2) The pickup in contract signings appears to be broadening with many affordable markets in mid-America now showing year-over-year gains, including Columbus, Ohio; Charleston, W.V.; Oklahoma City; and Colorado Springs, Colo. Pending sales have fallen significantly in Texas markets and in the Pacific Northwest—two regions with very strong local economies.

Yun said home prices did not fall as much as anticipated in the second quarter.

“Buyers entering the hardest-hit markets, in some cases with multiple-bid offers, may have put a floor on prices,” he said. “In addition, rising commodity prices and higher construction costs have resulted in a very unusual market today with existing-home prices being less than replacement building costs in some areas. Home prices are projected to increase 3 to 6 percent in 2009.”

Source: National Association of Realtors