Pending home sales have risen for nine months in a row – a first for the series of the index since its inception in 2001, according to the National Association of Realtors (NAR).
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in October, increased 3.7% to 114.1 from 110 in September, and is 31.8% above October 2008 when it was 86.6. The rise from a year ago is the biggest annual increase ever recorded for the index, which is at the highest level since March 2006 when it was 115.2.
Lawrence Yun, NAR chief economist, said home sales are experiencing a pendulum swing.
"Keep in mind that housing had been underperforming over most of the past year. Based on the demographics of our growing population, existing-home sales should be in the range of 5.5 million to 6 million annually, but we were well below the 5-million mark before the home buyer tax credit stimulus," he says. "This means the tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future."
The PHSI in the Northeast surged 19.9% to 100.2 in October and is 44.2% above a year ago. In the Midwest, the index rose 11.6% to 109.6 and is 36.6% higher than October 2008. Pending home sales in the South increased 5.4% to an index of 115.4, which is 31.6% above a year ago. In the West, the index fell 11.2% to 127.7, but is 21.9% above October 2008.
Still, home sales could dip in the months ahead, Yun cautions.
"The expanded tax credit has only been available for the past three weeks, but the time between when buyers start looking at homes until they close on a sale can take anywhere from three to five months," he says. "Given the lag time, we could see a temporary decline in closed existing-home sales from December until early spring when we get another surge, but the weak job market remains a major concern and could slow the recovery process.
SOURCE: National Association of Realtors