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Pending Home Sales Stable but Promising
November’s pending home sales improved from October levelsrnand posted the third consecutive year-over-year gain and the largest one inrnover a year. The National Association ofrnRealtors® (NAR) saidrnthe increase, while not large, was felt in every region but the Midwest. </p
The NAR’s November Pending Home Sales Index (PHSI) was uprn0.8 percent from October’s slightly down-graded level of 104.0 to 104.8. That was a 4.1 percent gain from the PHSI ofrn100.7 in November 2013, the largest such improvement since August 2013 when thernindex jumped 5.6 percent. </p
The PHSI is a forward looking indicatorrnbased on contract signings for home purchases. rnThese are generally expected to convert to closed sales in 60 or sorndays. </p
Lawrence Yun, NAR’s chief economist,rnsays signed contracts, though up slightly in November, haven’t broken out of theirrnmore or less stable performance even as the economy picked up steam thisrnspring. “The consistent economic growth and steady hiring we’ve seen thernsecond half of this year is giving buyers enough assurance to considerrnpurchasing a home before year’s end,” he said. “With rents now risingrnat a seven-year high, historically low rates and moderating price growth arernlikely to entice more buyers to enter the market in upcoming months.”</p
Yun also notes that falling gas prices</bwill likely boost consumer confidence and allow prospective buyers thernopportunity to save additional money for a downpayment. NAR's 2014 Profile ofrnHome Buyers and Sellers found that the median downpayment ranged from 6 percentrnfor first-time buyers to 13 percent for repeat buyers.</p
“There’s still misperception outrnthere that a much higher downpayment is needed, while that’s not thernreality,” adds Yun.</p
NAR is forecasting total existing homernsales to finish out the year at around 4.94 million units, down from 5.09rnmillion in 2013 (-3.0 percent). Sales inrn2015 are projected to rise to 5.30 million. rnThe 5.6 percent annual increase in the median price of a home, torn$208,000 expected as 2014 figures come in, is projected to moderate to a 4 to 5rnpercent increase next year, a substantial deceleration form the 11.4 percentrnincrease experienced in 2013.</p
The PHSI in the Northeast rose 1.4rnpercent to 89.1 in November to a level 7.0 percent above a year ago. In thernMidwest the index decreased 0.4 percent to 100.0 in November and is 0.5 lowerrnthan in November 2013.</p
Pending home sales in the South rosern1.3 percent to 119.7, a 5.1 percent year-over-year increase and in the West thernNovember PHSI reading of 98.5 is up 0.4 percent and 4.9 percent from thernrespective earlier levels.</p
The PHSI is based on a large nationalrnsample, typically representing about 20 percent of transactions forrnexisting-home sales. An index of 100 is equal to the average level of contractrnactivity during 2001, which was the first year to be examined and wasrncoincidentally a year where the volume of existing-home sales fell within thernrange of 5.0 to 5.5 million, considered normal for the current U.S. population.
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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
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