Pending home sales in the United States increased in March with lower priced properties performing better than more expensive ones, the latest index from the National Association of Realtors shows.
It means that activity in the residential property market place has seen an uneven pattern over the last nine months. Real estate agents though are encouraged that the market is recovering.
NAR’s Pending Home Sales Index increased 5.1% to 94.1 in March from a downwardly revised 89.5 in February. The index is now 11.4% below its 106.2 of March 2010 but then activity was at an artificially elevated level because of the approaching deadline for the homebuyer tax credit.
Lawrence Yun, NAR chief economist, said home sales activity has shown an uneven but notable improvement. ‘Since reaching a cyclical bottom last June, pending home sales have posted an overall gain of 24% and demonstrate the market is recovering on its own,’ he explained.
‘The index means modest near term gains in existing-home sales are likely, which would be even stronger if tight mortgage lending criteria returned to normal, safe standards,’ he added.
The national picture is mixed. In the Northeast of the country the index fell 3.2% to 63.4 in March and is 18.4% below a year ago. In the Midwest the index increased 3% 83.5 but is still 16.6% below March 2010.
While pending home sales in the South jumped 10.3% to an index of 110.2 but are 10.5% below March 2010. In the West the index increased 3.1% to 103.7 but is 4.1% below a year ago.
‘Based on the current up trend with very favourable affordability conditions, rising apartment rents and ongoing job creation, existing home sales should rise around 5 to 10% this year with sales growth of lower priced homes likely to outperform high end homes. That means the price trend will reflect more homes sold in the lower price ranges,’ Yun said.
‘The good news is that recent home buyers are staying well within budget, leading to exceptionally low loan default rates among home buyers over the past two years,’ Yun added.
The NAR is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries. Its Pending Home Sales Index is regarded as a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 % of transactions for existing home sales. In developing the model for the index, it was demonstrated that the level of monthly sales/contract activity parallels the level of closed existing home sales in the following two months.