June Pending Home Sales Index Shows Market Improvement
Washington, DC - A forward-looking indicator based on pending home sales shows the market is likely to stabilize in the months ahead, according to the National Assn. of REALTORS®.
The Pending Home Sales Index*, based on contracts signed in June, was 5.0% higher from the downwardly revised May index of 97.5, but is 8.6% below June 2006 when it stood at 112.0. This 5.0% monthly gain is the largest in more than three years, since a 6.1% increase in March 2004.
Lawrence Yun, NAR senior economist, said it is encouraging that the increase occurred in all four major regions. “However, it is too early to say if home sales have already passed bottom,” he said. “Still, major declines in home sales are likely to have occurred already and further declines, if any, are likely to be modest given the accumulating pent-up demand.”
The index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.
Annual changes in the index are more closely related to actual market performance than are month-to-month comparisons. As the relatively new index matures and seasonal adjustment factors are refined, the month-to-month comparisons will become more meaningful.
The PHSI in the West increased 8.6% in June to 103.6 but was 5.5% below a year ago. In the Northeast, the index rose 3.1% from May to 96.0 but is 2.4% lower than June 2006. The index in the South increased 4.7% in June to 111.6 but was 12.7% below a year ago. In the Midwest, the index rose 3.5% in June to 92.5 but was 8.2% lower than June 2006.
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