WASHINGTON (September 27, 2012) – After reaching a two-year peak, pending home sales fell in August but are at elevated levels compared with a year ago, according to the National Association of Realtors®.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, declined 2.6 percent to 99.2 in August from an upwardly revised 101.9 in July but is 10.7 percent above August 2011 when it was 89.6. The data reflect contracts but not closings.
Contract activity in July 2012 was at the highest level since April 2010 when buyers were rushing to beat the deadline for the home buyer tax credit.
Lawrence Yun , NAR chief economist, said some volatility can be expected in the monthly readings. "The performance in month-to-month contract signings has been uneven with ongoing shortages of lower priced inventory in much of the country, and across most price ranges in the West, but activity has remained at notably higher levels this year," Yun said.
"The index shows 16 consecutive months of year-over-year increases, and that has translated into a higher number of closed sales. Year-to-date existing-home sales are 9 percent above the same period last year, but sales were relatively flat from 2008 through 2011," Yun added.
Existing-home sales this year are expected to rise 9 percent to 4.64 million, and gain another 8 percent in 2013 to nearly 5.02 million. With generally balanced inventory conditions in many areas, the median existing-home price is projected to rise about 5 percent in both 2012 and 2013.
The PHSI in the Northeast rose 0.9 percent to 78.2 in August and is 19.9 percent above August 2011. In the Midwest the index declined 2.6 percent to 95.0 in August but is also 19.9 percent higher than a year ago. Pending home sales in the South slipped 1.1 percent to an index of 110.4 in August but are 13.2 percent above August 2011. With broad inventory shortages in the West, the index fell 7.2 percent in August to 102.5 and is 4.2 percent below a year ago.
Housing starts are forecast to stay on an uptrend and reach 1.12 million next year, but will remain well below long-term underlying demand with builders facing obstacles in obtaining construction loans.
Growth in the Gross Domestic Product should be 2.5 percent in 2013.
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
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* 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.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. 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.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.
NOTE: Existing-home sales for September will be reported October 19 and the next Pending Home Sales Index will be on October 25; release times are 10:00 a.m. EDT.