Pending Home Sales Reach Post-Bubble Milestone

by Peter Thomas Ricci

May 30, 2013

The Pending Home Sales Index was up more than 10 percent in April, rising to its highest mark since the expiration of the first-time homebuyer tax credit.

April was a solid month for pending home sales, with the Pending Home Sales Index rising 0.3 percent from March and 10.3 percent from April 2012, according to the National Association of Realtors.

More important, though, was the level of the index. For April, the Pending Home Sales Index hit 106.0, its highest mark since 110.9 in April 2010, which was recorded right before the first-time homebuyer tax credit expired. The tax credit, though well-intentioned, artificially boosted the housing market, which rose mightily in early 2010 only to slip once again as the year dragged on.

But now, it seems, pending sales have reached those early 2010 levels organically, which is a good sign for the housing recovery.

Pending Home Sales Index – Mixed Nationwide

Other findings from NAR’s latest Pending Home Sales Index included:

With its 10.3 percent year-over-year increase, the Pending Home Sales Index has now increased by yearly levels for two straight years.
Though nationally the index’s numbers were solid, the situation was a bit more complicated on the regional level.
The Northeast and Midwest showed superb contract activity, with pending sales rising 11.5 and 3.2 percent, respectively, from March to April, and 17.7 percent and 15.1 percent yearly.
Pending sales were more tepid in the South and the West, though, falling monthly by 1.1 and 7.6 percent, respectively (though sales remained 12.3 percent higher year-over-year in the South).

Strong Pending Home Sales = Strong Existing-Home Sales

Lawrence Yun, NAR’s chief economist, said increases in pending sales bode well for the association’s metrics on existing-home sales.

“Pending contracts so far this year easily correspond to higher closed home sales in 2013,” Yun said, adding that existing-home sales are expected to rise more than 7 percent in 2013.

And with housing inventory as low as it’s been, such sales activity will likely push home prices even higher.

“Because of inventory shortages, higher home sales will push up home values to the highest level in five years,” Yun said; NAR expects the national median existing-home price to rise nearly 8 percent in 2013.