Pending home sales rose 2% in December, marking the fifth gain in the past six months, according to the NATIONAL ASSOCIATION OF REALTORS®. NAR’s Pending Home Sales Index measures home sale contracts, which typically turn into home sale closings within one or two months.

NAR chief economist Lawrence Yun credits the rise to good affordability conditions and economic improvement. “Modest gains in the labor market and the improving economy are creating a more favorable backdrop for buyers, allowing them to take advantage of excellent housing affordability conditions. Mortgage rates should rise only modestly in the months ahead, so we’ll continue to see a favorable environment for buyers with good credit,” he said.

“In the past two years, home buyers have been very successful, with super-low loan default rates, partly because of stable home prices during that time. That trend is likely to continue in 2011 as long as there is sufficient demand to absorb inventory,” Yun said. “The latest pending sales gain suggests activity is very close to a sustainable, healthy volume of a mid-5 million total annual home sales. However, sales above 6 million, as occurred during the bubble years, is highly unlikely this year.”

Regional pending home sales

The PHSI in the Northeast increased 1.8% in December but is 5.3% below December 2009.  In the Midwest, the index rose 8.0% in but is 5.1% below a year ago.  Pending home sales in the South jumped 11.5% and are 1.7% above December 2009.  In the West, the index fell 13.2% and is 10.7% below a year ago.

Source: NAR