Pending home sales are on an upward trend, which has been uneven but meaningful since reaching a cyclical low last April, and are well above a year ago, according to the Pending Home Sales Index (PHSI) from the National Association of Realtors (NAR). The Index is a forward-looking indicator based on contract signings, rose two percent to 97.0 in January from a downwardly revised 95.1 in December and is eight percent higher than in January 2011 when it was 89.8. The data reflects contracts, but not closings. The January Index is the highest since April 2010 when it reached 111.3 as homebuyers were rushing to take advantage of the homebuyer tax credit.
"Given more favorable housing market conditions, the trend in contract activity implies we are on track for a more meaningful sales gain this year," said Lawrence Yun, NAR chief economist. "With a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations.”
The PHSI in the Northeast rose 7.6 percent to 78.2 in January and is 9.8 percent above a year ago. In the Midwest the index declined 3.8 percent to 88.1 but is 10.8 percent higher than January 2011. Pending home sales in the South increased 7.7 percent to an index of 109.1 in January and are 10.5 percent above a year ago. In the West the index fell 4.4 percent in January to 101.9, but is 0.7 percent above January 2011.
"Movements in the index have been uneven, reflecting the headwinds of tight credit, but job gains, high affordability and rising rents are hopefully pushing the market into what appears to be a sustained housing recovery," Yun said. "If and when credit availability conditions return to normal, home sales will likely get a 15 percent boost, speed up the home-price recovery, and thereby significantly reduce the number of homeowners who are underwater."