Pending home sales up
Pending home sales rose in October 10.4 percent from September and 9.2 percent in October 2010, according to the National Association of Realtors’ (NAR) Pending Home Sales Index (PHSI). The PHSI measures signed contracts which indicates that a possible increase in existing home sales for November and December could occur.
Dr. Lawrence Yun, NAR chief economist, said improved contract activity is a hopeful sign. “Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows and there is a pent-up demand from buyers who normally would have entered the market in recent years. We hope this is indicates more buyers are taking advantage of the excellent affordability conditions.”
Critics will be nervous at any NAR official pointing to pent-up demand, but based on various economic indicators coming from other sources, Yun is right as consumer confidence remains low and unemployment as well as underemployment remain problematic, both of which are holding buyers back. But while inventory levels are lowering which Yun calls a healthy sign, buyers remain on the sidelines due to the various factors that hold any buyer back in a down economy.
Regional performance varied
The PHSI rose 17.7 percent in October from September and is up 3.4 percent from October 2010.
In the Midwest, the PHSI increased 24.1 percent this month and is up 13.2 percent year over year.
The Southern region saw an 8.6 percent rise in October from September and is up 9.7 percent over the year.
In the West the index fell 0.3 percent in October but is a healthy 8.1 percent above a year ago.
“Although contract signings are up, not all contracts lead to closings. Many potential home buyers inadvertently hurt their credit scores and chances of getting a mortgage through easily averted actions, such as cancelling an old credit line while taking on a new one,” Yun said. “Such actions could unwittingly prevent buyers from obtaining a mortgage if their credit score is close the margins of qualifying, or they might get a loan but with less favorable terms.”