NAR: Pending sales at two-year high

WASHINGTON  June 27, 2012 – Pending home sales bounced back in May, matching the highest level in the past two years and well above year-ago levels, according to the National Association of Realtors® (NAR). Every region saw monthly and annual gains.

NARs Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose 5.9 percent to 101.1 in May from 95.5 in April; and it’s 13.3 percent above May 2011 when it was 89.2. The data reflect contracts but not closings.

The index also reached 101.1 in March, which is the highest level since April 2010, though at that time, buyers were rushing to beat the deadline for the homebuyer tax credit.

“The housing market is clearly superior this year compared with the past four years,” said Lawrence Yun, NAR chief economist. “The latest increase in home contract signings marks 13 consecutive months of year-over-year gains. Actual closings for existing-home sales have been notably higher since the beginning of the year, and we’re on track to see a 9 to 10 percent improvement in total sales for 2012.”

The national median existing-home price is expected to rise 3.0 percent this year and another 5.7 percent in 2013.

The PHSI in the Northeast increased 4.8 percent to 82.9 in May and is 19.8 percent above May 2011. In the Midwest, the index rose 6.3 percent to 98.9 in May and is 22.1 percent higher than a year ago. Pending home sales in the South increased 1.1 percent to an index of 106.9 in May and are 11.9 percent above May 2011. In the West the index jumped 14.5 percent in May to 108.7 and is 4.8 percent stronger than a year ago.

Pending home sales could be even higher, but low inventory could be holding back sales in some areas – a relatively new challenge.

“If credit conditions returned to normal, and if we had more inventory, especially in the lower price ranges, more people would become successful buyers,” Yun said. “In an environment of historically favorable housing affordability conditions, it’s frustrating to see some consumers thwarted in the process.”

Low inventory results partly from underwater homeowners who are unwilling to list their homes, which would require a lengthy short sale process or additional cash to complete the transaction. NAR estimates 85 percent of homeowners have positive equity, with 15 percent underwater.

“Low inventory can be cured by increasing new home construction,” Yun says. He projects housing starts to rise by 26 percent this year and another 50 percent in 2013.

“If housing starts do not rise in a meaningful way over the next two years due to the difficulty in getting construction loans, and barring an unexpected shift in the economy, the steady shedding of inventory could lead to shortages where home prices could get bid up close to 10 percent in 2013,” Yun said.

© 2012 Florida Realtors®

New home sales up, fastest pace in two years

WASHINGTON (AP) – June 25, 2012 – Americans bought new homes in May at the fastest pace in more than two years. The increase suggests a modest recovery in the housing market continues, despite weaker job growth.

The Commerce Department said Monday that sales of new homes increased 7.6 percent in May from April to a seasonally adjusted annual rate of 369,000 homes. That’s the best pace since April 2010, the last month that buyers could qualify for a federal homebuying tax credit.

Even with the gains, the pace is less than half the 700,000 that economists consider to be healthy.

Still, the increase follows other signs that suggest the housing market is rebounding nearly five years after the bubble burst.

Builders are slowing gaining confidence in the market and starting to build more homes. Mortgage rates have plunged to the lowest levels on record, making home buying more affordable. And sales of previously occupied homes are much higher than the same time last year.

Though new homes represent less than 20 percent of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.

The gains in new homes sold were concentrated in two regions of the country last month. Sales surged 36.7 percent in the Northeast and 12.7 percent in the South. Sales fell 10.6 percent in the Midwest and were down 3.5 percent in the West.

The median price of a new home sold in May edged down 0.6 percent from April to $234,500. But the price was 5.6 percent higher than the same month one year ago.

Sales of new homes are increasing despite a sluggish job market, which has slowed retail spending and business investment in computers and machinery. Some economists warned that the weaker job market has also started to affect some home sales.

Sales of previously occupied homes fell in May to a seasonally adjusted sales rate of 4.55 million after nearly touching a two-year high in April.

Still, sales have risen 9.6 percent from the same month last year.

Hiring slowed sharply in April and May, raising concerns about the strength of the recovery. Employers have added an average of only 73,000 jobs a month in April and May. That’s much lower than the average of 226,000 added in the first three months of this year.
 Copyright © 2012 The Associated Press, Martin Crutsinger, AP economics writer.