Favorable housing conditions were credited for leading pending home sales higher in July to their best level since August 2013.   Pending sales as measured by purchase contract signings rebounded from a slight dip in June that interrupted three straight months of steady gains. 

The Pending Home Sales Index (PHSI) compiled by the National Association of Realtors (NAR) rose 3.3 percent to 105.9 from 102.5 in June but is still 2.1 percent below the July 2013 level.  It is the third straight month the Index has been above 100, considered an average level of contract activity.  The gains were broad-based with only a slight decline in the Index in the Midwest.

Lawrence Yun, NAR chief economist, said, "Interest rates are lower than they were a year ago, price growth continues to moderate and total housing inventory is at its highest level since August 2012.  The increase in the number of new and existing homes for sale is creating less competition and is giving prospective buyers more time to review their options before submitting an offer."

NAR said the total housing inventory in July, at 2.37 million existing-homes available for sale, was the highest since August 2012.  At that time the inventory contained 2.40 million homes

Yun added, "More importantly, steady job additions to the economy are helping family finances and giving them added confidence to enter the market."

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

Pending sales in the Northeast jumped 6.2 percent to 89.2 in July, and the Index is 8.3 percent above a year ago. In the Midwest the index fell a marginal 0.4 percent to 104.6 and is 6.4 percent below July 2013.  

Pending home sales in the South increased 4.2 percent to an index of 119.0, 1.0 percent below a year ago. The index in the West rose to 99.5, an increase of 4.0 percent, but remains 6.0 percent below July 2013.

Yun is projecting that existing-homes sales will be 2.1 percent lower than in 2013, 4.98 million compared to 5.09 million units.  The national median existing-home price is projected to grow between 5 and 6 percent this year and 4 and 5 percent next year.

The PHSI is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales.  An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.