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July Pending Home Sales Offer Pleasant Surprise

by Peter Thomas Ricci

Pending home sales rose for the fourth time in five months, according to the National Association of Realtors.

Pending home sales rebounded in July, rising 3.3 percent from June according to the latest data from the National Association of Realtors.

The Pending Home Sales Index (PHSI), which NAR uses to track contract signings, stood at 105.9 in July, which is actually still 2.1 percent from July 2013. Still, the index is at its highest mark since Aug. 2013, has been positive four of the last five months, and for the last three months, the index has stood above 100, which indicates an average level of contract activity.

Pending Home Sales Bring Future Joy

Lawrence Yun, NAR’s chief economist, said a number of positive market developments contributed to July’s strong contract activity.

“Interest rates are lower than they were a year ago, price growth continues to moderate and total housing inventory is at its highest level since August 2012,” Yun said. “The increase in the number of new and existing homes for sale is creating less competition and is giving prospective buyers more time to review their options before submitting an offer.”

There were some regional differences within the index. Though the PHSI in the Northeast jumped 6.2 percent (and is 8.3 percent above a year ago), it was down 0.4 percent in the Midwest (and down 6.4 percent YOY), the only region to see a monthly decline; meanwhile, pending sales were up 4.2 percent in the South (1.0 below July 2013) and up 4.0 percent in the West (down 6.0 percent YOY).

Pending home sales in the South increased 4.2 percent to an index of 119.0 in July, and is now 1.0 percent below a year ago. The index in the West rose 4.0 percent in July to 99.5, but remains 6.0 percent below July 2013.

But still, even with those year-over-year declines, contract signing are comfortably ahead of both 2012 and especially 2011’s levels, as this wonderful chart from The Wall Street Journal demonstrates:

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And of course, these being pending home sales, the PHSI points towards future sales stats in NAR’s own existing-home sales reports. Based on July’s contract signings, Yun expects existing-home sales will drop 2.1 percent from 2013 to 2014, with median existing-home price rising between 5 and 6 percent. And more immediately, Trulia’s Jed Kolko anticipates August’s existing-home sales numbers (which will come out the third week in September) to rise 1.0 percent from July but fall 2.4 percent from August 2013.

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