RealNews

The Pending Home Sales Index rose 1.3 percent to a level of 113.4 in May, but was 10.1 percent lower than May 2005, according to the National Association of Realtors. The index is a leading indicator of home sales, based on home under contract or “in escrow,” when a contract has been signed and the transaction has not closed. The base year, index level of 100, is 2001, so the current rate is still 13.4 percent above 2001 levels.

National Association of Realtors Chief Economist David Lereah predicts the increase is an indicator of “a soft landing for the housing sector” when sellers will be more realistic about their expectations, sales will stabilize and price appreciation will return to normal.

housing market,pending home sales,home sales

Pending Home Sales Index Leveling Out

WASHINGTON (July 6, 2006) – The index of pending home sales, a leading gauge for the housing sector, rose slightly in May, an indication that the market is stabilizing, according to the National Association of Realtors®.

The Pending Home Sales Index,* based on contracts signed in May, was up 1.3 percent to a level of 113.4 from an index of 111.9 in April, but was 10.1 percent lower than May 2005.

The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed; pending sales typically are finalized within a month or two of signing.

An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined, and was the first of five consecutive record years for existing-home sales.

David Lereah, NAR’s chief economist, said the index appears to be moderating. “The slight change in pending home sales indicates the market is beginning to level out,” Lereah said. “This is consistent with our forecast, which is showing a soft landing for the housing sector. We are entering the second phase of the transition period from the housing boom, in which sellers are becoming more realistic about their expectations – sales are stabilizing and annual home price appreciation is returning to historic norms.”

Regionally, the PHSI in the South was down) 1.7 percent in May and was 7.3 percent lower than May 2005. In the Northeast, the index was down 0.6 percent in May and was 7.8 percent below a year ago. The index in the Midwest was up 0.6 percent to 100.9 in May but was 13.6 percent lower than May 2005. The index in the West rose 9.9 percent to 110.1 in May but was 12.9 percent below a year earlier.

Complete Index [PDF file in popup window]