The National Association of Realtors® (NAR) is reporting pending home sales rose strongly in October with mixed regional results. The Pending Homes Sales Index (PHSI), a forward-looking indicator based on contract signings, increased 5.2 percent in October. The data reflect contracts but not closings.
Lawrence Yun, NAR chief economist, said buyers are responding to favorable market conditions. “We have had very good housing affordability conditions for some time, but we’re seeing more from rising consumer confidence about home buying now that home prices have turned positive,” he explained.
Pending home sales are the highest level since March 2007. Contract activity surged in the Midwest and is showing healthy gains in the South, but was down slightly in both the Northeast and West. The Northeast saw some impact from Hurricane Sandy, but limited inventory in the West is keeping a lid on the market. All regions are up from a year ago, with double-digit gains in every regions but the West.
The recent PHSI release suggests that home sales should accelerate in November and December. Since home sales are considered pending when the contract is signed, but the transaction has not yet closed, the PHSI is considered a leading indicator of home sales.