Home sales in the US rebound, latest NAR data shows
Pending home sales in the United States bounced back in May, matching the highest level in the past two years, and are well above year ago levels, according to the latest data from the National Association of Realtors.
The Pending Home Sales index, a forward looking indicator based on contract signings, reveals that there were both monthly and annual gains in every region.
The index increased 5.9% to 101.1 in May from 95.5 in April and is 13.3% above May 2011 when it was 89.2. The data reflect contracts but not closings.
The index also reached 101.1 in March, which is the highest level since April 2010 when buyers were rushing to beat the deadline for the home buyer tax credit.
NAR chief economist Lawrence Yun said that longer term comparisons are more relevant. ‘The housing market is clearly superior this year compared with the past four years. The latest increase in home contract signings marks 13 consecutive months of year on year gains. Actual closings for existing home sales have been notably higher since the beginning of the year and we’re on track to see a 9 to 10% improvement in total sales for 2012,’ he explained.
The national median existing home price is expected to rise 3% this year and another 5.7% in 2013.
The PHSI in the Northeast increased 4.8% to 82.9 in May and is 19.8% above May 2011. In the Midwest the index rose 6.3% to 98.9 in May and is 22.1% higher than a year ago. Pending home sales in the South increased 1.1% to an index of 106.9 in May and are 11.9% above May 2011. In the West the index jumped 14.5% in May to 108.7 and is 4.8% stronger than a year ago.
Low inventory could hold back some contract activity, Yun warned. ‘If credit conditions returned to normal and if we had more inventory, especially in the lower price ranges, more people would become successful buyers. In an environment of historically favourable housing affordability conditions, it’s frustrating to see some consumers thwarted in the process,’ he said.
Low inventory results partly from underwater home owners who are unwilling to list their homes, which would require a lengthy short sale process, or additional cash to complete the transaction. NAR estimates 85% of home owners have positive equity, with 15% in an underwater situation.
Yun is predicting housing starts to rise by 26% this year and another 50% in 2013. ‘Low inventory can be cured by increasing new home construction. If housing starts do not rise in a meaningful way over the next two years due to the difficulty in getting construction loans, and barring an unexpected shift in the economy, the steady shedding of inventory could lead to shortages where home prices could get bid up close to 10 percent in 2013,’ he pointed out.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalised within one or two months of signing.