After declining for two consecutive months, pending sales of existing homes unexpectedly increased in February, the National Association of Realtors (NAR) reported Monday.
The trade group’s pending home sales index rose 2.1 percent compared to January but remains 8.2 percent below February 2010.
The index reading for last month was 90.8. Despite the month-to-month increase, weakness in the housing market is still apparent, as a reading of 100 indicates a healthy level of sales activity. The last time the pending sales index registered above the 100 mark was in April 2010 when homebuyers were rushing to sign contracts before the homebuyer tax credit deadline.
NAR’s pending sales index is a forward-looking indicator which is based on contracts rather than closings. The pending sales numbers typically lag actual sales numbers by about two months.
However, the latest reading may not be a clear indication of what can be expected of the actual sales numbers in light of statements from NAR earlier this month. The trade group says its market analysis has revealed that a “measurable” number of contracts are being cancelled as a result of appraisals that don’t support prices negotiated between buyers and sellers.
“Month-to-month movements can be instructive, but in this uneven recovery it’s important to look at the longer term performance,” said Lawrence Yun, NAR’s chief economist.
Yun explained, “Pending home sales have trended up very nicely since bottoming out last June, even with periodic monthly declines. Contract activity is now 20 percent above the low point immediately following expiration of the homebuyer tax credit.”
NAR pointed out in its report that there were “notable regional variations” in pending home sales during February, but Yun notes there could have been some weather impact reflected in the data.
“All of the regions saw gains except for the Northeast, where unusually bad winter weather may have curtailed some shopping and contract activity,” Yun said.
Pending sales of existing homes in the Northeast fell 10.9 percent between January and February. The region’s index reading of 65.5 is 18.4 percent below a year earlier.
In the Midwest the index rose 4.0 percent in February to 81.1 but is 15.9 percent below February 2010.
Pending home sales in the South increased 2.7 percent month-over-month to an index of 100.3 but are 5.3 percent below a year ago.
In the West the index rose 7.0 percent to 105.6 and is 0.6 percent higher than February 2010.
On how the pending sales numbers will likely translate to actual sales, Yun said, “We may not see notable gains in existing-home sales in the near term, but they’re expected to rise 5 to 10 percent this year with the economic recovery, job creation, and excellent affordability conditions providing confidence to buyers who’ve been on the sidelines.”
This article is from DSNews.com: “Pending Sales of Previously Owned Homes Rise Unexpectedly.”