Pending Home Sales Show Leveling Trend

Index shows home sales will not be moving much in one direction or another
RISMedia
Home sales are expected to hold fairly steady in the months ahead, according to the latest reading on pending home sales published by the National Association of Realtors.

The Pending Home Sales Index,* based on contracts signed in September, slipped 1.1% to a level of 109.1, following a 4.5% gain in August, but remains 13.6% below September 2005.

David Lereah, NAR’s chief economist, said the index shows home sales will not be moving much in one direction or another.

“The present level of home sales is relatively high in historic terms, and we can expect generally minor movements around this level,” said Lereah. “We don’t expect to see any changes of note until early next year when we’re likely to see a modest lift to home sales. The market currently is a little lower than expected as buyers try to time their entry. In the meantime, there’s some build-up in demand that will move when consumers realize that conditions are optimal for them.”

The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed; pending sales typically are 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 the first of five consecutive record years for existing-home sales. There is a closer relationship between annual changes in the index and year-ago changes in sales performance than with month-to-month comparisons.

Regionally, the PHSI in the Midwest rose 2.1% in September to 96.4 but was 18.4% below September 2005. The index in the West slipped 0.4% to 112.5 in September and was 15.2% below a year ago. In the South, the index eased 1.3% in September to 125.0 and was 9.0% below September 2005. The index in the Northeast fell 5.9% to 89.9 in September and was 15.9% lower than a year earlier.

More information about The National Association of Realtors can be found at www.realtor.org.