We don't usually cover the monthly report on pending home sales issued by the
National Association of Realtors® (NAR), concentrating instead on NAR and
the Census Bureau's other reports on housing permits and starts and the completed
sales of new and of existing homes. However, with good news in such short supply
lately - perhaps the understatement of the year - it seems worth talking about
the smidgen of sunshine that accompanied the pending sales
report for June.
The Pending Home Sales Index, based on residential home contracts
signed in June was 102.4, 5 percent higher than the downwardly revised May index
of 97.5. The index was still lagging behind the 112.0 pace in June, 2006 by
8.6 percent, but the increase over May was the biggest jump in more than three
year, since March 2004 pending sales were 6.1 percent higher than those in February
The index has a baseline established in 2001, the first year pending sales
were examined, based on the average of contract activity that year. That level
was designated at 100 in the index. Coincidentally 2001 was also the first of
five consecutive years when existing home sales set records.
The official NAR website states that annual changes in the
index are more closely related to actual market performance than are month-to-month
comparisons but as the relatively new index matures and seasonal adjustment
factors are refined, the month-to-month comparisons will become more meaningful.
The Index increased 8.6 percent to 103.6 in the Western region in June but declined
5.5 percent year-over-year. In the Northeast the index was 96.0, 2.4 percent
lower than last year but 3.1 percent higher than in May. The South had an index
of 111.6 which was 4.7 percent above May figures but 12.7 percent below one
year ago. The Midwest increased 3.5 percent to 92.5 but was 8.2 percent lower
than June 2006.
Lawrence Yun, NAR senior economist, said that it was especially
encouraging that all four regions saw increases. "However, it is too early
to say if home sales have already passed bottom. Still, major declines in home
sales are likely to have occurred already and further declines, if any, are
likely to be modest given the accumulating pent-up demand."
The index is a leading indicator for the housing sector. 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 for June will represent a subset of the actual sales of existing homes
that close in July. NAR will release those sales figures near the end of this