Home Sales Index Points Toward Improving Market

There’s some positive news on the future of homernsales. </p

The Pending Home Sales Index rose sharply in May, indicating an upbeatrnoutlook for the second half of the year, according to the National Association ofrnRealtors®.  The Index, released on Wednesday, showedrnpending sales up nationally with every region recording increases on bothrna month-over-month and one year comparison.  A sale is listed as pending when the contractrnhas been signed but the transaction has not closed, though the sale is typicallyrnfinalized within one or two months of signing.</p

The Index rose 8.2 percent to 88.8 inrnMay from April’s figure of 82.1 percent which was also revised upward from thernpreliminary numbers.  The May figures arern13.4 percent above the May 2010 numbers. rnThis is the first time in over a year that year-over year index figuresrnwere up and was the largest increase since November 2010 when pending salesrnrose 10.6 percent.</p

An index of 100 is equal to the average level of contract activity duringrn2001, the base year for the index.  2001rncoincided with the first of five consecutive record years for existing-homernsales so represents a level that is historically healthy.</p

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Lawrence Yun, NAR chief economist, said the Index increase bodes well forrnhome prices. “Absorption of inventory is the key to price improvement, and thisrnsolid gain in contract signings implies that home values in many localities arernor will soon be stabilizing as inventories get absorbed at a faster pace,” hernsaid. “Some markets have made a rapid turnaround, going from soft activity torncontract signings rising by more than 30 percent from a year ago, includingrnareas such as Hartford, Conn.; Indianapolis; Minneapolis; Houston; andrnSeattle.”</p

Pending home sales have trended up unevenly since bottoming last June,rnrising in seven of the past 11 months. “Home sales still could be 15 to 20rnpercent higher,” Yun said. “If banks would simply return to normal soundrnunderwriting standards and begin lending to more creditworthy borrowers, we’drnget a much faster recovery in the housing sector.”</p

On a regional basis, in the West, which may have been hardest hit by thernhousing downturn, the Index surged 12.9 percent to 100.6.  This is 13.5 percent above May 2010.  The Midwest rose 10.5 percent to 82.8 percent,rn17.2 percent higher than a year earlier and in the Northeast the increase was 7.3rnpercent from April and 4.4 percent year-over-year.  The Index in the South was up 4.1 percent torn95.0, 14.6 percent higher than a year earlier. </p

Yun indicated that the figures might have been higher.  “A nonsensical situation has developedrnrecently in some states with HUD unable to complete foreclosure deals becausernof insufficient funds to pay attorney fees at closing, even with buyersrnoffering the full listing price.”

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