Pending home sales increased in June following a wide swing down in April and then up in May, according to the National Association of REALTORS®. Activity increased in the West and South but declined in the Midwest and Northeast; all regions show strong double-digit gains from a year ago.
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose 2.4 percent to 90.9 in June from 88.8 in May and is 19.8 percent above the 75.9 reading in June 2010, which was the low point immediately following expiration of the home buyer tax credit. The data reflects contracts but not closings.
Lawrence Yun, NAR chief economist, said there may be some increase in closed existing-home sales. “For the majority of transactions, the lag time between pending contacts to actual closings is one to two months. Therefore, the two consecutive months of rising activity should lead to overall improvement in closed sales in upcoming months,” he said. “Though a higher than normal cancellation rate can hold back final closing figures, it could well be that some past cancellations are nothing more than delayed buying decisions rather than outright cancellations.”
Yun said tight credit and economic uncertainty have been constricting the market. “The best way to ensure a more solid recovery in housing is to simply return to normal, sound credit standards so more creditworthy home buyers can get a mortgage,” he said.
“Washington also should not rock the boat with policy changes that would negatively impact affordable credit or otherwise increase the cost of buying or owning a home,” Yun added.
Breakdown by region:
Northeast: The PHSI slipped 0.4 percent to 68.9 in June, but is 19.4 percent higher than June 2010.
Midwest: The index fell 3.7 percent to 79.7 in June, but is 26.4 percent above a year ago.
South: Pending home sales increased 4.4 percent to an index of 99.2 and are 19.1 percent higher than June 2010.
West: The index rose 6.4 percent to 107.0 in June and is 16.4 percent above a year ago.
Existing-home sales this year are expected to total 5 million, slightly higher than 2010. Similarly, little change is forecast for aggregate home prices with several indicators, including NAR’s median prices, showing recent signs of stabilization.
Reprinted from REALTOR® Magazine Online July 2011 with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2011. All rights reserved.