Pending Home Sales Rebound In May
The pending home sales index rebounded to a high of 101.1 in May, which is the same level seen in April 2010 after the home buyer tax credit. Compared to May 2011 and April 2012, pending home sales are 13.3% and 5.9% higher respectively according to the National Association of Realtors. NAR estimates existing-home prices to rise 3% this year and another 5.7% in 2013.
Lawrence Yun, NAR chief economist, said, “The housing market is clearly superior this year compared with the past four years. The latest increase in home contract signings marks 13 consecutive months of year-over-year gains,” he said. “Actual closings for existing-home sales have been notably higher since the beginning of the year and we’re on track to see a 9 to 10 percent improvement in total sales for 2012.”
All regions reported monthly and annual sales gains, indicating real demand for homes. The West had the largest monthly percentage gain of 14.5%, followed by the Midwest (+6.3%), Northeast (+4.8%), and the South (+1.1%). Annually, the Midwest experienced the greatest percentage gains, up 22.1% y-o-y.
NAR economists report that low inventory could hold back contract activity. However, Yun reports that increasing new home construction can help low inventory problems. He estimates housing starts to increase 26% in 2012 and 50% in 2013.
“If housing starts do not rise in a meaningful way over the next two years due to the difficulty in getting construction loans, and barring an unexpected shift in the economy, the steady shedding of inventory could lead to shortages where home prices could get bid up close to 10 percent in 2013,” Yun said.
Source: National Association of Realtors