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.
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
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
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.