Pending Home Sales Highest Since 2010 Tax Credit Expiration

The National Association of Realtors® (NAR) Pending Home Sales Index reached the highest level seen in two and a half years in November after posting its third consecutive monthly increase.  The previous recent high was in April 2010 when buyers were rushing to qualify for the homebuyers' tax credit.

The PHSI rose to 106.4 in November, a 1.7 percent increase over the October number which was revised down slightly to 104.6 from the 104.8 originally reported.  The November index was 9.8 percent above the index of 96.9 in November 2011.

The PHSI is a forward looking indicator of home sales based on contract signings.  Home sales are typically completed within one to two months of contract signings. 

Lawrence Yun, NAR chief economist, said home sales are on a sustained uptrend.  "Even with market frictions related to the mortgage process, home contract activity continues to improve.  Home sales are recovering now based solely on fundamental demand and favorable affordability conditions."

NAR's press release noted that pending home sales have increased over the previous year's level for 19 consecutive months.  "The upward momentum means existing-home sales should rise 8 to 9 percent in 2013 to approximately 5.1 million, following a 10 percent gain expected for all of 2012.  The median existing-home price is projected to rise just over 4 percent in 2013, after rising more than 7 percent in 2012."

On a regional basis the Index rose 5.2 percent in the Northeast to 83.3 and is 15.2 percent above a year ago.  In the Midwest the index edged up 0.1 percent to 103.8 in November and is 15.2 percent above November 2011.  Pending home sales in the South were unchanged at an index of 117.2 in November and are 13.9 percent higher than a year ago.  In the West the index rose 4.2 percent in November to 110.1, but is 3.2 percent below November 2011 with inventory constraints limiting sales.

The Pending Home Sale Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined.