Pending Home Sales Rise; NAR Sees Tight Inventory Leading to Price Increases
Pending home sales in May bouncedrnback to match March numbers which were the highest seen in two years. Thernimprovement was broad-based, affecting every region in the country according tornthe National Association of Realtors® (NAR). rn</p
NAR’s Pending Home Sales Index (PHSI)rnrose 5.9 percent in May from 95.5 in April to 101.1, equaling the index level lastrnMarch. This was an increase of 13.3rnpercent from May 2001 when the index was 89.2. rnThe last time the PHSI was higher than the March and May number was inrnApril 2010 when buyers were rushing to beat the deadline for the home buyer taxrncredit.</p
The PHSI is a forward indicatorrnreflecting signed contracts for home purchases. rnThe index does not include closing transactions which are generallyrnexpected to occur within 60 to 90 days.</p
Lawrence Yun, NARrnchief economist, said longer term comparisons are more relevant. “Thernhousing market is clearly superior this year compared with the past fourrnyears. The latest increase in home contract signings marks 13 consecutivernmonths of year-over-year gains,” he said. “Actual closings forrnexisting-home sales have been notably higher since the beginning of the yearrnand we’re on track to see a 9 to 10 percent improvement in total sales forrn2012.”</p
The nationalrnmedian existing-home price is expected to rise 3.0 percent this year andrnanother 5.7 percent in 2013.</p
On a regionalrnbasis, May pending sales in the Northeast increased 4.8 percent to 82.9, 19.8rnpercent above May 2011. The pending sales number in the Midwest was 98.9rnup 6.3 percent from April and 22.1 percent from a year ago. The index forrnthe South increased 1.1 percent month over month and 11.9 percent year overrnyear to an index of 106.9. In the Westrnthe index jumped 14.5 percent in May to 108.7 and is 4.8 percent stronger thanrna year ago.</p
Yun said thatrnlow inventory could negatively impact some contract activity. “If creditrnconditions returned to normal and if we had more inventory, especially in thernlower price ranges, more people would become successful buyers. In anrnenvironment of historically favorable housing affordability conditions, it’srnfrustrating to see some consumers thwarted in the process,” he said.</p
The lowrninventory in some cases is because of the numbers of homeowners who are unwillingrnto list their homes for sale because they are underwater on their mortgages. Selling underwater homes requires that sellersrneither bring cash to the table or undergo a lengthy and often frustrating shortrnsale process. NAR estimates 85 percentrnof homeowners have positive equity, with 15 percent in an underwater situation.</p
“Low inventoryrncan be cured by increasing new home construction,” Yun said. He projectsrnhousing starts to rise by 26 percent this year and another 50 percent in 2013. “If housing starts do not rise in a meaningfulrnway over the next two years due to the difficulty in getting constructionrnloans, and barring an unexpected shift in the economy, the steady shedding ofrninventory could lead to shortages where home prices could get bid up close torn10 percent in 2013,” Yun said.
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