Pending home sales reached a two-year high, rising in every region of the country last month, data from the NATIONAL ASSOCIATION OF REALTORS® shows.
NAR’s Pending Home Sales Index, which measures how many homes have been sold but not yet closed, rose 5.9% in May and was 13.3% above May 2011.
While that’s the highest level since April 2010 when buyers were rushing to beat the deadline for the home buyer tax credit, NAR Chief Economist Lawrence Yun said longer-term comparisons are more relevant.
“The housing market is clearly superior this year compared with the past four years. The latest increase in home contract signings marks 13 consecutive months of year-over-year gains,” he said. “Actual closings for existing-home sales have been notably higher since the beginning of the year and we’re on track to see a 9% to 10% improvement in total sales for 2012.”
He predicts the national median existing-home price will rise 3.0% this year and another 5.7% in 2013.
Regional pending home sales
Pending home sales rose in all regions in May:
- The Northeast increased 4.8% and was 19.8% above May 2011.
- The Midwest rose 6.3% and was 22.1% higher than a year ago.
- The South increased 1.1% and was 11.9% above May 2011.
- The West jumped 14.5% and was 4.8% stronger than a year ago.
Not enough homes for sale
Low inventory could hold back some contract activity, Yun said. “If credit conditions returned to normal and if we had more inventory, especially in the lower price ranges, more people would become successful buyers. In an environment of historically favorable housing affordability conditions, it’s frustrating to see some consumers thwarted in the process,” he said.
Low inventory results partly from underwater home owners who are unwilling to list their homes, which would require a lengthy short-sale process, or additional cash to complete the transaction. NAR estimates 85% of home owners have positive equity, with 15% in an underwater situation.
“Low inventory can be cured by increasing new home construction,” Yun said. He projects housing starts to rise by 26% this year and another 50% in 2013.
“If housing starts do not rise in a meaningful way over the next two years due to the difficulty in getting construction loans, and barring an unexpected shift in the economy, the steady shedding of inventory could lead to shortages where home prices could get bids up close to 10% in 2013,” Yun said.