Pending home sales, while increasing only slightly in September, exceeded those of a year earlier, the first time in 11 months this has occurred. The National Association of Realtors® (NAR) also said that its Pending Home Sales Index (PHSI), which rose 0.3 percent to 105.0 is at its second-highest level since last August.

The index is a forward indicator based on contracts signed for the purchase of a home.  The September reading is 1.0 higher than in September 2013 and it is the fifth consecutive month in which the PHSI has exceeded 100.  Contract signings are generally expected to turn into home sales within 60 to 90 days.

Lawrence Yun, NAR's chief economist, says moderating price growth and sustained inventory levels are keeping conditions favorable for buyers. "Housing supply for existing homes was up in September 6 percent from a year ago, which is preventing prices from rising at the accelerated clip seen earlier this year," he said. "Additionally, the current spectacularly low mortgage rates should help more buyers reach the market." 

NAR said that even with improved inventory and continued low interest rates many would-be buyers are still encountering problems with financing.  When queried about reasons that pending sales have not closed, about 15 percent of NAR members cited their customers' problems with obtaining mortgage financing.

Yun says the final rule on Qualified Residential Mortgages should improve access to credit once it goes into effect next year. "The rule provides clarity for lenders and is a win for creditworthy consumers by ensuring they continue to have access to safe and affordable loan products without overly burdensome downpayment requirements," he said.

The PHSI increased 1.2 percent in the Northeast to 87.5 in September, and is now 2.9 percent above a year ago. In the Midwest the index was down 1.2 percent to 101.2 in September, and is now 4.0 percent below September 2013. 

Pending home sales in the South increased 1.4 percent to an index of 118.5 in September, 1.7 percent higher than a year earlier and in the West they inched back 0.8 percent from the August number to 101.3.  This was still 3.6 percent higher than a year ago.

NAR's index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. The index has a base of 100 which is equal to the average level of contract activity during 2001, 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. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.