Pending Home Sales Expected to Rebound Soon
( February 1, 2006) -- Pending home sales continue to decline but are expected to recover in the months ahead, according to the NATIONAL ASSOCIATION OF REALTORS®.
The Pending Home Sales Index, based on contracts signed in December, was down 3 percent to a level of 116.4 from 120.0 in November, and is 5.5 percent below December 2004. Pending sales have trended steadily down from a record index of 129.2 last August.The index is based on pending sales of existing homes.
A sale is listed as pending when the contract has been signed and the transaction has not closed, but 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, the first year to be examined, and was the first of five consecutive record years for existing-home sales.
David Lereah, NAR’s chief economist, says momentum in the housing market shifts slowly. “Changes in the overall direction of the housing market are akin to a large ship making course corrections – it takes some time for the driving factors to materialize as a change in the sales level,” he says. “In many recent transactions we’re looking at a delayed effect of mortgage interest rates that peaked in November but are now lower than expected."
Mortgage applications have trended up in recent weeks, so we shouldn’t be surprised to see pending home sales rise in the next couple months, he adds.Even with an upturn in sales, Lereah expects the housing market to stay below last year’s record. “We’re going through a period of adjustment," he says. "As home sellers recognize a return to more normal rates of price growth, some that have been holding out for higher prices will be more willing to negotiate terms that are acceptable to buyers but still provide them a solid return on their investment.”
Regionally, the Pending Home Sales Index in the South rose 2.3 percent in December to 135.9 and was 4.1 percent above December 2004. In the Northeast, the index increased 1.5 percent to 90.7 but was 11.1 percent below December 2004. The index in the West fell 8.1 percent to 117.1 in December and was 11.8 percent lower than a year ago. In the Midwest, it dropped 9.3 percent to a level of 105.8 and was 11.0 below December 2004.
The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 closely parallels the level of closed existing-home sales in the following two months.
Existing-home sales for January will be released Feb. 28; the next Pending Home Sales Index will be on March 6. —NAREditor's
The Pending Home Sales Index, based on contracts signed in December, was down 3 percent to a level of 116.4 from 120.0 in November, and is 5.5 percent below December 2004. Pending sales have trended steadily down from a record index of 129.2 last August.The index is based on pending sales of existing homes.
A sale is listed as pending when the contract has been signed and the transaction has not closed, but 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, the first year to be examined, and was the first of five consecutive record years for existing-home sales.
David Lereah, NAR’s chief economist, says momentum in the housing market shifts slowly. “Changes in the overall direction of the housing market are akin to a large ship making course corrections – it takes some time for the driving factors to materialize as a change in the sales level,” he says. “In many recent transactions we’re looking at a delayed effect of mortgage interest rates that peaked in November but are now lower than expected."
Mortgage applications have trended up in recent weeks, so we shouldn’t be surprised to see pending home sales rise in the next couple months, he adds.Even with an upturn in sales, Lereah expects the housing market to stay below last year’s record. “We’re going through a period of adjustment," he says. "As home sellers recognize a return to more normal rates of price growth, some that have been holding out for higher prices will be more willing to negotiate terms that are acceptable to buyers but still provide them a solid return on their investment.”
Regionally, the Pending Home Sales Index in the South rose 2.3 percent in December to 135.9 and was 4.1 percent above December 2004. In the Northeast, the index increased 1.5 percent to 90.7 but was 11.1 percent below December 2004. The index in the West fell 8.1 percent to 117.1 in December and was 11.8 percent lower than a year ago. In the Midwest, it dropped 9.3 percent to a level of 105.8 and was 11.0 below December 2004.
The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 closely parallels the level of closed existing-home sales in the following two months.
Existing-home sales for January will be released Feb. 28; the next Pending Home Sales Index will be on March 6. —NAREditor's
posted by Jeff Foster @ Friday, February 03, 2006
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