(September 1, 2009 Release)
• The pending home sales index rose 3.2 percent in July to 97.6, compared to 94.6 in June.
• The pending home sales index rose 12.1 percent from a year ago.
• The West, South and Midwest recorded increases of 12.1, 3.1 and 2 percent, respectively, while the Northeast decreased 3 percent in July from a month earlier.
|Pending Home Sales Index|
|July 09||June 09||3 mo Avg||1 year ago|
Source: National Association of Realtors; index is seasonally adjusted
The July pending homes sales release offered favorable news for future existing home sales activity in our nation’s housing sector. The index experienced healthy increases on a month over month and year over year basis. The index has increased for six consecutive months and is over 21 percent above its January low. All four regions of the nation experienced year over year increases in July.
Although there is still some fallout from pending contracts to actual closings, the pending home sales index is becoming a more reliable indicator of future existing home sales. Pending home sales measures contracts on existing homes rather than closings so the improvement in the index usually portends favorably for future existing home sales reports. It is likely that recent increases in existing home contracts are due to improved affordability conditions as well as the first-time homebuyer tax credit.
Looking forward, it is likely from a sales perspective, that the housing sector is gaining a modest momentum from its recent cyclical bottom. The major housing measures- housing starts, existing home sales and new home sales have all posting numbers slightly above their January cyclical lows. This pending home sales release suggests that it is likely that existing home sales may drift slighty upward in the coming months. However, a recession, a weak labor market and the expiring of the federal government’s home tax credit will keep the housing sector from experiencing any meaningful gains for the remainder of this year.