Pending Home Sales Up for 9th Straight Month

By:: Kara Johnson | December 01, 2009

Pending home sales rose for the ninth consecutive month in October and posted their biggest-ever one-year increase as well, according to figures released today by the National Association of Realtors.

Signed contracts for home sales increased by 3.7 percent in October over the previous month, confounding the expectations of economists, who had predicted a small decline. Compared to October 2008, pending sales were up 31.8 percent, the biggest yearly increase since the NAR began tracking data in 2001.

The NAR’s Pending Sales Index now stands at 114.1, representing the highest level of sales activity since March 2006, just before housing prices began to fall, when it stood at 115.2. The figures are an encouraging sign that the housing market is continuing to recover despite concerns over rising unemployment and foreclosures.

Lawrence Yun, NAR chief economist, credited the $8,000 first-time homebuyer tax credit with unleashing pent-up demand from a large pool of financially qualified renters. He said that prior to the credit, home sales had been running well below a pace of 5 million units a year, compared to the 5.5 million to 6.0 million annual units one would expect based on the growth of the population.

He predicted that sales could decline in the months ahead, despite the recent extension of the tax credit and the creation of a $6,500 credit for repeat buyers. He noted that because most buyers take 3-5 months from the time they first start shopping to when they close on a home, it could be early spring before the effects of the new credit are seen.

“Still, as inventories continue to decline and balance is gradually restored between buyers and sellers, we should reach self-sustaining housing conditions and firming home prices in most areas around the middle of 2010,” Yun said.

Home sales showed their strongest increase in the Northeast, shooting up by 19.9 percent for the month and by 44.2 percent over October 2008. Meanwhile, sales in the Western region fell 11.2 percent in October, the only monthly decline among the four major U.S. regions, though were still up 21.9 percent from last year.

Sales in the Midwest were up 11.6 percent for the month and 36.6 percent for the year, while sales in the South rose 5.4 percent for the month and 31.6 percent for the year.

No information was provided on median or average sales prices.

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