Pending Home Sales Show Another Gain

by bkrigbaum@solagroup.com







Pending home sales have
increased for the second consecutive month, according to the National
Association of Realtors.

The Pending
Home Sales Index
, a
forward-looking indicator, rose 4.3 percent to 82.3 based on contracts
signed in August from a downwardly revised 78.9 in July, but is 20.1
percent below August 2009 when it was 103.0. The data reflects
contracts and not closings, which normally occur with a lag time of one
or two months.

Lawrence
Yun
, NAR chief economist, said
the latest data is consistent with a gradual improvement in home sales
in upcoming months. “Attractive affordability conditions from
very low mortgage interest rates appear to be bringing buyers back to
the market,” he said. “However, the pace of a home
sales recovery still depends more on job creation and an accompanying
rise in consumer confidence.”

Although Yun expects a
continuing steady rise in home sales from favorable affordability
conditions and some job creation, he cautioned any sudden rise in
mortgage rates could slow the recovery. “Current low consumer
price inflation has helped keep mortgage interest rates very attractive
this year. However, recent rising trends in producer prices at the
intermediate and early stages of production, along with very high
commodity prices, are raising concerns about future inflation and
future mortgage interest rates,” he said. “Higher
inflation would mean higher mortgage interest rates. In the meantime,
housing affordability is hovering near record highs.”

The PHSI in the Northeast
declined 2.9 percent to 60.6 in August and remains 28.8 percent below
August 2009. In the Midwest the index rose 2.1 percent in August to
68.0 but is 26.5 percent below a year ago. Pending home sales in the
South increased 6.7 percent to an index of 90.8 but are 13.1 percent
below August 2009. In the West the index rose 6.4 percent to 101.1 but
remains 19.6 percent below a year ago.


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