The Pending Home Sales Index, a forward looking indicator based on contract signings, surged 10.4% to 93.3 in October from 84.5 in September and is 9.2% above October 2010 when it stood at 85.5. The data reflects contracts but not closings.
Improved contract activity is a hopeful sign, according to Lawrence Yun, NAR chief economist. ‘Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows and there is a pent-up demand from buyers who normally would have entered the market in recent years. We hope this is indicates more buyers are taking advantage of the excellent affordability conditions,’ he explained.
‘Many consumers are recognizing that home buyers in the past two years have had one of the lowest default rates in history. Moreover, continued inventory declines are another healthy sign for the housing market,’ Yun added.
The PHSI in the Northeast surged 17.7% to 71.3 in October and is 3.4% above October 2010. In the Midwest the index jumped 24.1% to 88.7 in October and remains 13.2% above a year ago. Pending home sales in the South rose 8.6% in October to an index of 99.5 and are 9.7% higher than October 2010. In the West the index slipped 0.3% to 105.5 in October but is still 8.1% above a year ago.
‘Although contract signings are up, not all contracts lead to closings. Many potential home buyers inadvertently hurt their credit scores and chances of getting a mortgage through easily averted actions, such as cancelling an old credit line while taking on a new one,’ Yun said.
‘Such actions could unwittingly prevent buyers from obtaining a mortgage if their credit score is close the margins of qualifying, or they might get a loan but with less favorable terms,’ he added.
