Pending Home Sales Rise at Fastest Pace Since 2010

There was encouraging home market newsrnfrom the National Association of Realtors® (NAR) this morning.  The association’s Pending Home Sales Indexrnsurged in May, increasing 6.11 percent from pending sales in April.  The index, a forward-looking indicator basedrnon home purchase contracts moved from a value of 97.9 in April to 103.9.  Sales resulting from those contract signingsrnare generally expected to close in about 60 days.</p

The gain was broad based with all fourrnregions of the country experiencing an uptick in contract signings.  It was also the largest month-over-monthrnincrease since April 2010 when an influx of first-time buyers rushed to takernadvantage of the homebuyer tax credit. rnThe gain at that time was 9.6 percent. rnStill the May index remained 5.2 percent below the 109.6 reading of Mayrn2013.</p

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Lawrence Yun, NAR chief economist said contract signings in Mayrncould be a harbinger of a better second half of the year.  “Sales should exceed an annual pace of fivernmillion homes in some of the upcoming months behind favorable mortgage rates,rnmore inventory and improved job creation,” he said. “However, second-half salesrngrowth won’t be enough to compensate for the sluggish first quarter and willrnlikely fall below last year’s total.”  </p

Affordabilityrnand access to credit are still concerns for first-time buyers, Yun said.  That sector of the market accounted for onlyrn27 percent of existing home sales in May and typically are limited in theirrnaccess to credit because of student loan debt and lower credit scores. </p

Yun expectsrnexisting-homes sales to be down 2.8 percent this year to 4.95 million, comparedrnto 5.1 million sales of existing homes in 2013. The national median existing-homernprice is projected to grow between 5 and 6 percent this year and in the rangernof 4 to 5 percent in 2015.</p

“Thernflourishing stock market the last few years has propelled sales in the higherrnprice brackets, while sales for homes under $250,000 are 10 percent behind lastrnyear’s pace. Meanwhile, apartment rents are expected to rise 8 percentrncumulatively over the next two years because of tight availability,” said Yun.rn”Solid income growth and a slight easing in underwriting standards are neededrnto encourage first-time buyer participation, especially as renting becomes lessrnaffordable.”  </p

While the PHSIrnincreased month-over-month in every region only in the Northeast was it higherrnthan a year earlier.  In that region thernindex jumped 8.8 percent to 86.3 in May, and is 0.2 percent above the level inrnMay 2013.  </p

In the Midwestrnthe index rose 6.3 percent to 105.4 in May, but is still 6.6 percent below thernprevious year. Pending home sales in the South advanced 4.4 percent to an indexrnof 117.0 in May, 2.9 percent below a year ago. The index in the West rose 7.6rnpercent in May to 95.4, but remains 11.1 percent lower than in May 2013.

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