Statistics released by the National Association of Realtors (NAR) reveal a modest increase in pending home sales. According to the Pending Home Sales Index (PHSI), a forward-looking indicator based solely on contract signings, March witnessed a 1.5 percent increase in pending home sales over February. Buyers continue to show confidence in the market by signing contracts.
Pending home sales are currently sitting at 105.7, showing a seven percent increase over this time last year. Because the level of monthly sales-contract activity traditionally parallels the level of closed existing-home sales, March’s numbers indicate a potential rise in future house sales.
Pending home sales, in which contracts have been signed but not closed, continue to surpass above year-ago rates. Positive trends have been seen for approximately two years straight. Lawrence Yun, a chief economist associated with the NAR, has alluded to the benefit this increase should have on the housing sector. “Contract activity has been in a narrow range in recent months, not from a pause in demand but because of limited supply. Little movement is expected in near-term sales closings, but they should edge up modestly as the year progresses,” he said. “Job additions and rising household wealth will continue to support housing demand.”
The following trends indicate how specific geographic regions were reflected on the recent PHSI:
- The Northeast index increased 6.3 percent from March 2012.
- The Midwest index increased 13.7 percent from March 2012.
- The South’s index increased 10.4 percent from March 2012.
- The West was the only region to reflect a decrease, as pending home sales were 4.3 percent below last year.
The PHSI represents one of the most prominent housing sector indicators, as it measures pending housing contract activity. Not to be confused with closing transactions, pending sales represent the signing of a contract. The index, therefore, takes into consideration 20 percent of signed real estate contracts for existing single-family homes, condos and co-ops.
As pending home sales have exhibited a direct correlation to existing-home sales, March’s 1.5 percent increase may result in more sales for 2013. Total existing-home sales for this year are expected to reach five million, seven percent more than this time a year ago. The national median existing-home price is also project to receive a modest bump in value, expected to rise about 7.5 percent. Increased activity could see in upward trend in new housing starts as well.
