Rising Mortgage Rates May be Forcing Home Buyers off the Fence: NAR

ThernNational Association of Realtors® (NAR) said today that risingrninterest rates may finally be forcing many hesitant buyers into thernmarket. NAR’s Pending Home Sales Index (PHSI) which is based on homernpurchase contracts, reached the highest in May that it has achievedrnsince late 2006. NAR also announced it was upgrading its pricernforecast for 2013. </p

ThernPHSI increased 6.7 percent to 112.3 in May from April’s level ofrn105.2 (revised down from an original estimate of 106.0.) The Mayrnnumber was 12.1 percent above the PHSI in May 2012 when it was 100.2rnThe index has been higher than in the corresponding month a yearrnearlier for each of the last 25 months and the May number was thernhighest for the Index since December 2006 when it was 112.8. </p

ThernIndex is a forward looking indicator based which has proven to bernpredictive of home sales. Transactions under contract are generallyrnexpected to close within 60 days. An index of 100 is equal to thernaverage level of contract activity during 2001, which was the firstrnyear to be examined.    </p

NAR’srnchief economist Lawrence Yun said the recent rising interest ratesrnmay be creating a fence-jumping effect. “Even with limitedrnchoices, it appears some of the rise in contract signings could bernfrom buyers wanting to take advantage of current affordabilityrnconditions before mortgage interest rates move higher,” he said. rn”This implies a continuation of double-digit price increases from arnyear earlier, with a strong push from pent-up demand.”</p

Yunrnsaid he expected the national median existing-home price to rise morernthan 10 percent to nearly $195,000 by year end.  This would bernthe strongest increase since 2005 when the median increased 12.4rnpercent.</p

Existing-homernsales are projected to increase 8.5 to 9.0 percent, reaching aboutrn5.07 million in 2013, the highest in seven years; it would bernslightly above the 5.03 million total recorded in 2007.</p

ThernPHSI in the Northeast was unchanged at 92.3 in May but is 14.3rnpercent above a year ago.  In the Midwest the index jumped 10.2rnpercent to 115.5 in May and is 22.2 percent higher than May 2012. rnPending home sales in the South rose 2.8 percent to an index of 121.8rnin May and are 12.3 percent above a year ago.  The index in thernWest jumped 16.0 percent in May to 109.7, but with limited inventoryrnis only 1.1 percent above May 2012.

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