Pending Home Sales Bounce Back

Showing more evidence of a receding "buyers market," pending home sales bounced back in May, matching the highest level in the past two years, and are well above year-ago levels, according to the National Association of Realtors. Both monthly and annual gains were seen in every region. The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 5.9 percent to 101.1 in May from 95.5 in April and is 13.3 percent above May 2011 when it was 89.2. The data reflect contracts but not closings. The index also reached 101.1 in March, which is the highest level since April 2010 when buyers were rushing to beat the deadline for the home buyer tax credit.

Lawrence Yun, NAR chief economist, 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 percent improvement in total sales for 2012.” The national median existing-home price is expected to rise 3.0 percent this year and another 5.7 percent 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 bid up close to 10 percent in 2013,” Yun said.