Pending Home Sales Decline in December, Remain Above a Year Ago

by devteam January 25th, 2012 | Share

Pending home sales fell off of thern19-month high reached in November according to figures released on Wednesday byrnthe National Association of Realtors® (NAR), but were still higher than onernyear ago.  NAR’s Pending Home Sales Indexrn(PHSI) dropped from 100.1 in November to 96.6 in December, a decline of 3.5 percent.  December pending home sales were still 5.6rnpercent above the December 2010 index of 91.5.</p

The PHSI is a measure of signedrnsales contracts for home purchases where the transaction has not closed.  It is considered a forward indicator as thernsale is usually finalized within one or two months of contract signing.  An indexrnof 100 is equal to the average level of contract activity during 2001. </p

Lawrence Yun, NAR chief economist, said the trend line remainsrnpositive.  “Even with a modest decline, the preceding two months ofrncontract activity are the highest in the past four years outside of thernhomebuyer tax credit period,” he said.  “Contract failures remain anrnissue, reported by one-third of Realtors® over the past few months,rnbut home buyers are not giving up.”</p

Yun said somernbuyers successfully complete the sale after a contract delay, while others stayrnin the market after a contract failure and make another offer.  “Housingrnaffordability conditions are too good to pass up,” he said.  “Our hope isrnlending conditions will gradually improve with sustained increases in closedrnexisting-home sales.”</p

On a regionalrnbasis results were mixed with three regions showing increases on a year to yearrnbasis but only one increasing during the December.</p

Pending Home Sales by Region</p<table border="1" cellpadding="6" cellspacing="0"<tbody<tr<td valign="top" width="104"

Region</p</td<td valign="top" width="124"

Index in</p

December</p</td<td valign="top" width="138"

Chg Nov torn Dec.</p

(%)</p</td<td valign="top" width="132"

Chg Dec.rn 2010 to</p

Dec. 2011rn (%)</p</td</tr<tr<td valign="top" width="104"

Northeast</p</td<td valign="top" width="124"

74.7</p</td<td valign="top" width="138"

-3.1</p</td<td valign="top" width="132"

-0.8</p</td</tr<tr<td valign="top" width="104"

Midwest</p</td<td valign="top" width="124"

95.3</p</td<td valign="top" width="138"

+4.0</p</td<td valign="top" width="132"

+13.3</p</td</tr<tr<td valign="top" width="104"

South</p</td<td valign="top" width="124"

101.1</p</td<td valign="top" width="138"

-2.6</p</td<td valign="top" width="132"

+4.9</p</td</tr<tr<td valign="top" width="104"

West</p</td<td valign="top" width="124"

107.9</p</td<td valign="top" width="138"

-11.0</p</td<td valign="top" width="132"

+3.7</p</td</tr<tr<td valign="top" width="104"

U.S.</p</td<td valign="top" width="124"

96.6</p</td<td valign="top" width="138"

-3.5</p</td<td valign="top" width="132"


NAR also issued an economic forecast which predicts a healthy growth inrnboth real and nominal GPD over the next two years with real GDP growing in a historicallyrnnormal range of around 3 percent and the unemployment rate falling under 8rnpercent by 2013.  </p

Housing starts are expected to improve to around 750,000 in 2012 andrnreach a million the next year – both figures well below the historicallyrntypical 1.5 million.  Housing sales, bothrnnew and existing, will remain relatively flat with new home sales reaching arnhalf million by the end of 2013.  rnExisting home sales are estimated to have totaled 4.26 million in 2011rnand will rise gradually to 4.45 million and 4.62 million in 2012 and 2013rnrespectively.  </p

Inventories are not projected into the future, but the supply of existingrnhomes is trending down and is now around 2.25 million.  The inventory of new homes has declined to arnnearly negligible level, however given the pace of sales, both inventoriesrnrepresent about a six month supply.</p

NAR expectsrnmedian prices of both new and existing homes to rise only slightly from currentrnlevels of$223,400 and $166,100 during 2012 but will rise more rapidly duringrn2013 to a median level of $235,800 and $172,600 by year end.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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