NAR Pending Home Sales Index Hits Record

The Pending Home Sales Index, a leading indicator for the housing market, has risen to the highest level on record, according to the NATIONAL ASSOCIATION OF REALTORS®.

Based on data collected for April, the Pending Home Sales Index stands at 128.2, which is 3.6 percent higher than March and 9.2 percent above April 2004. The previous record was 128.1 in October 2004.

The index is based on pending sales of existing homes, including single-family homes and condos. A sale is pending when the contract has been signed but the transaction has not closed. Pending home sales typically close within one or two months of signing.

David Lereah, NAR’s chief economist, says the index shows record levels of home sales are possible for May and June.

“Although the record we set for existing-home sales in April was a bit of a surprise, the rise in sales contracts results from declining mortgage interest rates,” he says. “Home sales were expected to be tapering this year, but the index tells us that historic home sales are likely to continue.”

The report on May existing-home sales will be released June 23.

An index of 100 is equal to the average level of contract activity during 2001, the first year to be analyzed. Coincidentally, 2001 was the first of four consecutive record years for existing-home sales.

2001 sales are fairly close to the higher level of home sales expected in the coming decade relative to the norms experienced in the mid-1990s. As such, an index of 100 coincides with a historically high level of home sales activity.

Regionally, the index in the South jumped 7.7 percent to 138.9 and was 12.5 percent higher than a year ago. In the Midwest, it rose 4.5 percent to 122.0 in April, and was 4.5 percent above April 2004. The Northeast increased 4.1 percent to a reading of 120.8 in April, and was 10.1 percent higher than a year earlier. The index in the West declined 3.9 percent in April to 123.8, but was 8.0 percent above April 2004.