A strong rise in pending home sales nationwide in May compared to a year ago is a positive sign pointing to higher housing activity in the second half of the year, according to a National Association of REALTORS® report released on Wednesday.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 8.2 percent to 88.8 in May from a revised 82.1 in April. The index was 13.4 percent higher than in May 2010, when it was 78.3 percent. This is the first time since April 2010 that contract activity was above year-ago levels. The monthly gain was the strongest increase since last November, when the index rose 10.6 percent.
The NAR report follows a California Association of REALTORS® last week that indicated a rise in pending home sales, the first year-over-year increase in the state in 18 months. California's May Pending Home Sales Index was 118.3, up 1.6 percent from the April index of 116.4, and up 12 percent from May 2010.
Commenting on the positive data, NAR chief economist Lawrence Yun said the improvement bodes well for home prices. "Absorption of inventory is the key to price improvement, and this solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace," he said.
The PHSI in the Northeast rose 7.3 percent to 69.2 in May and is 4.4 percent above a year ago. In the Midwest the index jumped 10.5 percent to 82.8 and is 17.2 percent higher than May 2010. Pending home sales in the South increased 4.1 percent to an index of 95.0 in May and are 14.6 percent higher than a year ago. In the West the index surged 12.9 percent to 100.6 and is 13.5 percent above May 2010.
"It's very good news for the housing market, but there are still concerns. Lenders need to ease their tough standards, which have swung to the other side of the pendulum as an overreaction to problems caused by overly liberal underwriting standards in the past," said Gene Lentz, president of the Silicon Valley Association of REALTORS®. "It is also critical that Congress extend the conforming loan limits which are set to expire on September 30. If they drop down, it will be another blow to borrowers."
REALTORS® have long advocated making permanent higher conforming loan limits. Congress temporarily raised the conforming loan limits from $417,000 to $729,750 and has extended them each year. They will drop to the original loan limits October 1 if Congress does not extend them again.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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