Pending home sales increased in November for the third consecutive month and reached the highest level in two-and-a-half years, according to the National Association of Realtors (NAR). The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose 1.7 percent to 106.4 in November from a downwardly revised 104.6 in October and is 9.8 percent above November 2011 when it was 96.9. The data reflect contracts but not closings. The PHSI is at the highest level since April 2010 when it hit 111.3 as buyers were rushing to beat the deadline for the first-time homebuyer tax credit. With the exception of several months affected by tax stimulus, the last time there was a higher reading was in February 2007 when the index reached 107.9.
“Even with market frictions related to the mortgage process, home contract activity continues to improve," said Lawrence Yun, NAR chief economist. "Home sales are recovering now based solely on fundamental demand and favorable affordability conditions.”
On a year-over-year basis, pending home sales have risen for 19 consecutive months. The upward momentum means existing-home sales should rise eight to nine 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 seven percent in 2012.
The PHSI in the Northeast rose 5.2 percent to 83.3 in November 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.