Pending Home Sales, Other Economic Indicators Gain

Pending home sales rose in July for the sixth consecutive month, the longest streak of monthly increases since the National Association of Realtors (NAR) began tracking the data in 2001, one of several reports today offering positive economic news.

The NAR's Pending Sales Index, based on home sales contracts signed in July, rose 3.2 percent from June to a level of 97.6. It's the highest reading the index has shown since June 2007 and 12.0 percent over the July 2008 reading.

The new figures show that the housing market is clearly building positive momentum, said Lawrence Yun, NAR chief economist.

"The recovery is broad-based across many parts of the country," Yun said. " Housing affordability has been at record highs this year with the added stimulus of a first-time buyer tax credit."

Home prices reverse decline

Also this morning, federally backed megalender Freddie Mac reported that home prices posted a 1.7 percent gain in the second quarter of the year (equal to a 7.0 percent annual rate), following a 1.5 percent decline in the first quarter of the year. It was the first time in two years that home prices rose in all regions of the nation, according to Freddie Mac's Conventional Mortgage Home Price Index (CMHPI).

"The pickup in home price growth rates is consistent with other housing market indicators that show home sales and single-family construction up in the second quarter," said Frank Nothaft, Freddie Mac vice president and chief economist. "The lowest mortgage rates in a half-century have pushed housing affordability to the highest level in at least 40 years, helping to encourage buying."

Nothaft noted that spring is typically the strongest buying season of the year, which has been borne out again this year. He said that home values still remain below their recent peaks, however, with most regions of the country posting home-purchase values at 2004-05 levels. A notable exception was the West South Central region, where values were only slightly below their 2008 peak.

Manufacturing posts first increase in 18 months

On a different economic front, the Institute for Supply Management reported today that U.S. manufacturing activity increased in August for the first time after 18 consecutive months of declines, rising 4.0 percent. The ISM said the rise was primarily driven by a 9.6 percent increase in new orders, as companies seek to replenish their stocks following 40 consecutive months of declining inventories.

"The year-and-a-half decline in manufacturing output has come to an end, as 11 of 18 manufacturing industries are reporting growth when comparing August to July," said Norbert J. Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee. "While this is certainly a positive occurrence, we have to keep in mind that it is the beginning of a new cycle and that all industries are not yet participating in the growth."

Construction stagnates

Not all of the day's economic news was positive, however. The Commerce Department reported this morning that construction activity remained stagnant in July, declining a statistically insignificant 0.2 percent from June. The seasonally adjusted rate of $958.0 billion in construction activity is 10.5 percent below the July 2008 level of $1,070 billion.

Private residential construction rose by an estimated 2.3 percent in July, while nonresidential construction fell 1.2 percent.