Pending Home Sales Show Modest Gain
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- Kara Johnson | December 30, 2010
Pending home sales posted a modest increase in November, as the housing market gradually comes back from the stunning lows of last summer.
The National Association of Realtors Pending Home Sales Index increased 3.5 percent in November, to a reading of 92.5. The seasonally adjusted index, in which 100 reflects average sales during 2001, had fallen as low as 75.5 in June following the expiration of the homebuyer tax credit.
The increase was primarily driven by strong sales in the Western region of the country, which posted a monthly gain of 18.2 percent. Sales in the South and Midwest actually declined.
“In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market,” said Edward Yun, NAR chief economist. “But further gains are needed to reach normal levels of sales activity.”
Yun said that sales should return to higher, sustainable level if forecasts for the economy to add 2 million jobs play out and mortgage rates remain low, as expected.
“All the indicator trends are pointing to a gradual housing recovery,” Yun said. “Home price prospects will vary depending largely upon local job market conditions. The national median home price, however, is expected to remain stable even with a continuing flow of distressed properties coming onto the market, as long as there is a steady demand of financially healthy home buyers.”
The NAR projects home sales will increase about 8 percent in 2011, to an annual level of 5.2 million, with an additional 4 percent gain the year after. However, any recovery in home values still appears to be far off, with median home prices forecast to increase by only 0.6 percent next year.
“As we gradually work off the excess housing inventory, supply levels will eventually come more in-line with historic averages, and could allow home prices to rise modestly in the range of 2 to 3 percent in 2012,” Yun said.
On an annual basis, national sales are down 5.0 percent from November 2009, when sales were boosted by the approach of the original expiration for the homebuyer tax credit, which was subsequently extended through April 2010.
Pending home sales figures reflect sales contracts signed and typically precede actual sales (i.e., closings) by about two months.
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