WASHINGTON (December 1, 2009) — Pending home sales have risen for nine months in a row, a first for the series of the index since its inception in 2001, according to the National Association of REALTORS®.
The Pending Home Sales Index (PHSI), based on contracts signed in October, increased 3.7%, up 31.8% above October 2008. That’s the largest year-over-year rise ever recorded for the index.
The PHSI measures pending sales of existing homes, meaning sales for which a contract is signed, but the deal hasn’t closed. Home sales typically take one to two months to reach closing.
The housing market is experiencing a pendulum swing, said NAR Chief Economist Lawrence Yun. “Keep in mind that housing had been underperforming over most of the past year,” he explained. “Based on the demographics of our growing population, existing-home sales should be in the range of 5.5 million to 6.0 million annually, but we were well below the 5-million mark before the home buyer tax credit stimulus.”
The surge shows the tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, rather than borrowing sales from the future, he added.
Regionally, the Northeast posted the strongest numbers, surging 19.9% in October and 44.2% above a year ago.
In the Midwest, the index rose 11.6% in October, which was 36.6% higher than October 2008.
Pending home sales in the South increased 5.4% in October and 31.6% above a year ago.
In the West, pending home sales fell 11.2%, but were still 21.9% above the pace of October 2008.
Yun cautioned that home sales could dip in the months ahead. “The expanded tax credit has only been available for the past three weeks, but the time between when buyers start looking at homes until they close on a sale can take anywhere from three to five months. Given the lag time, we could see a temporary decline in closed existing-home sales from December until early spring when we get another surge, but the weak job market remains a major concern and could slow the recovery process.
“Still, as inventories continue to decline and balance is gradually restored between buyers and sellers, we should reach self-sustaining housing conditions and firming home prices in most areas around the middle of 2010. That would mean broad wealth stabilization for the vast number of middle-class families,” Yun said.
Source: NATIONAL ASSOCIATION OF REALTORS®