The National Association of Realtors released the Pending Home Sales Index for September today.
NAR's Pending Home Sales Index measures the number of home purchase contracts that were signed in the monthly reporting period. Once "pending" sales contracts are closed, they are considered an Existing Home Sale. Because the Pending Home Sales index tells us how many contracts were signed, it is considered a forward indicator of Existing Home Sales. A signed contract is not counted as an Existing Home Sale until the transaction actually closes.
Excerpts from the Release...
Pending home sales retreated after two monthly gains, signaling an uneven recovery entering 2011 with some near-term disruptions from the foreclosure moratorium, according to the National Association of Realtors®.
The Pending Home Sales Index, a forward-looking indicator, slipped 1.8 percent to 80.9 based on contracts signed in September from an upwardly revised 82.4 in August. However, the index remains 24.9 percent below a surge to 107.8 in September 2009 when first-time buyers were jumping into the market to take advantage of the initial deadline for the tax credit last November.
The PHSI in the Northeast slipped 1.7 percent to 59.6 in September and is 28.3 percent below a year ago. In the Midwest the index fell 5.7 percent in September to 64.2 and remains 33.0 percent below September 2009. Pending home sales in the South declined 3.5 percent to an index of 87.6 and are 19.1 percent below a year ago. In the West the index rose 3.5 percent to 104.6 but is 24.7 percent below September 2009.
Lawrence Yun, NAR chief economist, said there is a mix of factors in the housing market. “Existing-home sales have shown some improvement but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead,” he said. “Nonetheless, there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures and the labor market improves. However, tight credit and appraisals coming in below a negotiated price continue to constrain the market.”
In examining the underlying fundamentals, Yun expects the Gross Domestic Product to grow 2.0 to 2.5 percent over the next two years. With a projection of 1.5 million additional jobs over the next two years, the unemployment rate should decline to 8 percent by 2013 and return to a normal level of around 6 percent in 2015.
Existing-home sales are forecast to gradually rise, with some occasional dips along the way. “For 2011 we should see more than 5.1 million existing-home sales, up from about 4.8 million this year. Housing starts are expected to rise to 716,000 in 2011 from 598,000 this year,” Yun said. “We’ve added 30 million people to the U.S. population over the past 10 years, but sales are where they were in 2000, so there appears to be a sizable pent-up demand that could come to the market once the economy gathers momentum.”
Lawrence Yun, NAR chief economist, said the latest data is consistent with a gradual improvement in home sales in upcoming months. “Attractive affordability conditions from very low mortgage interest rates appear to be bringing buyers back to the market,” he said. “However, the pace of a home sales recovery still depends more on job creation and an accompanying rise in consumer confidence.”
CONSUMER CONFIDENCE HIT A 7-MONTH LOW IN SEPTEMBER and seems to have pulled Pending Home Sales down in the process. In October Consumer Confidence improved from an upwardly revised 48.6 to 50.2. Combine that with the 151,000 jobs that were created and we should be seeing an uptick in Pending Home Sales when October data is released on December 2, 2010.
Did you notice an increase in homebuyer demand in October?