Pending Home Sales Index Suggests Market Stabilizing
An upward blip on an index of the National Association of Realtors® on pending home sales suggests that the housing market may be stabilizing.
“Our sense is that home sales may have reached a low in August,” said David Lereah, the association’s chief economist. “The Pending Home Sales Index shows home sales should be fairly stable over the next two months, although a minor decline is possible. With fewer new listings coming on the market, we should be able to draw down the inventory supply early next year to the point where home prices will rise, but at a slower pace than historic norms.”
Based on contracts that were signed in August, the Pending Homes Sales Index rose 4.3% to a level of 110.1 from the previous month, but was still 14.1% lower than August 2005.
A home is listed as pending when the contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing.
An index of 100 is equal to the average level of contract activity during 2001.
In his analysis of weekly mortgage interest rates last Thursday and the factors influencing them, Freddie Mac Chief Economist Frank Nothaft said that a bright note in the week’s releases on home sales “was that the average time new homes stood for sale narrowed from 6.6 months to 6.3 months in August, which should mitigate some of the softening of new home prices over the next few months. In addition, both lower mortgage rates and a moderation in house price growth should lead to increased housing affordability — especially as family incomes are forecasted to continue rising.”