Pending Home Sales Hit 9-Year Highs

Pending home sales hit their highest level in over nine years in May,rnindicating that the strong existing and new home sales announced last week arernlikely to be repeated again for June and maybe even July activity.  The National Association of Realtors® (NAR) saidrnthat its Pending Home Sales Index (PHSI) rose 0.9 percent from April’s level ofrn11.6 to 112.6 in May.  The report came inrnahead of one survey’s expectations of a 0.6 percent increase, but behind the Reuters poll of 1.2 percent.</p

The rise in the PHSI put it 10.4 percent higher than in May 2014 and marked itsrnninth straight year-over-year gain. It is now at its highest point since Aprilrn2006 when it hit 113.7.</p

It was also the fifth straight month-over-month increase and NAR’s chiefrneconomist Lawrence Yun said this increases the likelihood the home are headingrninto their best year since the housing crisis began.  “The steady pace of solid job creationrnseen now for over a year has given the housing market a boost thisrnspring,” said Yun. “It’s very encouraging to now see a broad basedrnrecovery with all four major regions showing solid gains from a year ago andrnnew home sales also coming alive.”</p

The PHSI is a leading indicator based on contract signings for home purchasesrnincluding single family homes, condos, co-ops, and townhouses.  These contracts general result in a salernwithin 60 days.</p

Yun does warn that this year’s stronger sales amidst similar housing supplyrnlevels from a year ago have caused home prices to rise to an unhealthy andrnunsustainable pace.  “Housingrnaffordability remains a pressing issue with home-price growth increasing aroundrnfour times the pace of wages,” adds Yun. “Without meaningful gains inrnnew and existing supply, there’s no question the goalpost will move furtherrnaway for many renters wanting to become homeowners.”</p

Month-over-month performance was mixed by region but all four areas scoredrnyear-over-year growth.  The indexrnincreased in the Northeast by 6.3 percent for the month and 10.6 percent on anrnannual basis while the Midwest was down 0.6 percent from April but remained 7.8rnpercent above the May 2014 level. </p

Pending home sales in the South decreased 0.8 percent to an index of 127.8rnin May but are still 10.6 percent above last May. The index in the West rosern2.2 percent in May to 104.5, and is 13.0 percent above a year ago.</p

Bloomberg said that solid momentum appears to be building inside of thernhousing market.  “Today’s report pointsrnto further strength for the existing home sales report which surged in datarnposted last week. Housing is getting a boost from the strong jobs marketrntogether perhaps with the prospect of rising mortgage rates which may bernpushing buyers into the market.”

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