Pending Home Sales Index Rises Slightly

"We have various housing indicators moving in different directions, which itself is an indicator of a market in transition," says NAR Chief Economist David Lereah.
NAR: REALTOR® Magazine Online
Pending home sales, a leading indicator for the housing sector, have risen for the last two months, according to the NATIONAL ASSOCIATION OF REALTORS®.

The Pending Home Sales Index, based on contracts signed in June, increased 0.4 percent to a reading of 113.9 from an upwardly revised level of 113.5 in June, but is 9.6 percent below June 2005.

The index is based on pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing.

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

Market Strives for Balance

David Lereah, NAR’s chief economist, says the small rise in the index is good news, indicating that the trend is stabilizing.

“Once again, we have various housing indicators moving in different directions, which itself is an indicator of a market in transition,” he says. “The housing market is striving for balance – a process that will take several months.

"A quieting in the movement of indicators should restore confidence to home buyers who’ve been on the sidelines, waiting for the right time to get into the market, and now is the best time we’ve seen since the 1990s in terms of housing choices and flexible terms.”

Regional Fluctuations

Regionally, pending home sales in the South rose 2.5 percent in June to 130.7 but was 4.8 percent below June 2005. The index in the Midwest increased 1.9 percent to 103.3 in June but was 11.9 percent below a year ago.

The index in the West was unchanged, holding at 110.1 in June, and was 14.2 percent lower than June 2005. In the Northeast, the index dropped 6.3 percent in June to 99.4 and was 11.6 percent below a year ago.