Pending Home Sales Up 2.1 Percent in February

ThernNational Association of Realtors® (NAR) released its February Pending HomernSales Index (PHSI).   The index is a leading indicator for the housing sector; it measures salesrnactivity based on sales of single-family homes, coops and condos whererncontracts have been signed but the transactions have not closed. </p

Accordingrnto the data, pending home sales increased in February but with notable regionalrnvariations.  The national Index rose 2.1rnpercent to 90.8 in February compared to 88.9 in January.  This, however, is a drop of 8.2 percent fromrnthe Index figures in February 2010.  </p

Data comes from a large national sample which represents about 20rnpercent of existing-home sale transactions. rnThe index is derived from a base of 100 representing the average levelrnof contract activity during 2001, the year the index was established. NAR notesrnthat base year coincided with the first of five years of notable health in thernreal estate industry. The February Index figure indicates that sales contractsrnwere signed at 90.8 percent of the level of that initial year.</p

In the Northeast Region the PHSI fell 10.9 percent to 65.5 in Februaryrnand is 18.4 percent below a year ago. In the Midwest the index rose 4.0 percentrnin February to 81.1 but is 15.9 percent below February 2010. Pending home salesrnin the South increased 2.7 percent to an index of 100.3 but are 5.3 percentrnbelow a year ago. In the West the index rose 7.0 percent to 105.6 and is 0.6rnpercent higher than February 2010.</p

The PHSI is a forward indicator of housing sales and it has beenrndemonstrated that it closely parallels the level of existing home salesrntransactions, 80 percent of which close in the following two months.  While most of the remainder is finalized inrnmonths three and four, not all pending sales do ultimately close and thernpercentage of that fallout has been on the rise since early 2009.</p

NAR’s Chief Economist Lawrence Yun said of the February figures, “Month-to-month movements can berninstructive, but in this uneven recovery it’s important to look at the longerrnterm performance.  Pending home salesrnhave trended up very nicely since bottoming out last June, even with periodicrnmonthly declines. Contract activity is now 20 percent above the low pointrnimmediately following expiration of the home buyer tax credit.”</p

We may not see notable gains in existing-home sales in the near term,rnbut they’re expected to rise 5 to 10 percent this year with the economicrnrecovery, job creation and excellent affordability conditions providingrnconfidence to buyers who’ve been on the sidelines,” Yun said.  He also noted that there could have been somernweather impact in the February data. “All of the regions saw gains except forrnthe Northeast, where unusually bad winter weather may have curtailed somernshopping and contract activity.”

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