Home for sale in Memphis, TN. Photo by Lindsey Turner.
Pending home sales up
In a surprising report, the National Association of Realtors is reporting an unexpected rise of 2.4% in pending home sales (contracts signed) in June, as many expected it to fall in light of recent reports that existing home sales slid, with contract cancellations as one of the primary factors.
NAR reports that pending home sales for June are up 20% from June of 2010, a dramatic increase despite recent J.D. Power polling that found homebuyers to be less satisfied with the process than in 2010, and reports of rising consumer cynicism.
A Reuters poll of economists indicated that pending home sales for June were projected to drop 2.0%, leading to quite a surprise.
Contracts signed by region
Pending home sales fell in some regions from May but have all risen since 2010. The Northeast dropped 0.4% in June but rose 19.4% from June 2010. The Midwest region experienced a 3.7% drop in June, but is up 26.4% from twelve months prior. In the West, pending home sales rose 6.4%, making it the strongest rise in June, with a total increase of 16.4% from June 2010. The Southern region also performed well in June, seeing a 4.4% increase in contracts signed in June, up 19.1% from June 2010.
Rising activity could help closings
NAR Chief Economist, Lawrence Yun said, “For the majority of transactions, the lag time between pending contacts to actual closings is one to two months. Therefore, the two consecutive months of rising activity should lead to overall improvement in closed sales in upcoming months,” he said. “Though a higher than normal cancellation rate can hold back final closing figures, it could well be that some past cancellations are nothing more than delayed buying decisions rather than outright cancellations.”
How to start a housing recovery
Yun noted that “The best way to ensure a more solid recovery in housing is to simply return to normal, sound credit standards so more creditworthy home buyers can get a mortgage. Washington also should not rock the boat with policy changes that would negatively impact affordable credit or otherwise increase the cost of buying or owning a home.”
Bruce Lemieux
July 28, 2011 at 11:19 am
This is a terribly misleading headline. To be credible, any month-to-month comparison to this time last year must account for the effects of the 2010 tax credit. As buyers rushed to get the credit, contracts were smushed into the March and April 2010 buckets, and then created a crater of activity in May and June.
At least in my market, contract activity normally peaks in the May/June timeframe, and then slowly declines. So a slight increase this month is 'normal' — whatever that is these days.