| Pending home sales, a leading indicator for the housing
market, have risen to the third highest level on record, according to
the National Association of Realtors®.
The Pending Home Sales Index,* based on data collected for June, rose
0.6 percent to a reading of 126.3, and is 3.6 percent higher than June
2004.
The index is based on pending sales of existing homes, including
single-family and condos; a sale is pending when the contract has been
signed but the transaction has not closed. Pending home sales typically
close within one or two months of signing.
David Lereah, NAR’s chief economist, said the index shows historic
levels of home sales will continue in the near future. “Existing-home
sales will stay in record territory for transactions in July and August,”
he said. “There is some volatility to the index due to the short
history of seasonal factors, so we’re not predicting another record
month, but it certainly is possible.” Existing-home sales in June were
at the highest level on record.
An index of 100 is equal to the average level of contract activity
during 2001, the first year to be analyzed. Coincidentally, 2001 was the
first of four consecutive record years for existing-home sales. 2001
sales are fairly close to the higher level of home sales expected in the
coming decade relative to the norms experienced in the mid-1990s. As
such, an index of 100 coincides with a historically high level of home
sales activity.
Regionally, the PHSI in the West increased 3.5 percent to 128.9 in
June and was 7.3 percent higher than June 2004. The index in the Midwest
rose 0.7 percent to 116.3 in June, but was 1.7 below a year ago. In the
South, the index increased 0.4 percent to 138.0, and was 6.0 percent
higher than June 2004. The Northeast index fell 3.2 percent to 113.2 in
June, but was 0.9 percent higher than a year earlier.
The National Association of Realtors®, “The Voice for Real Estate,”
is America’s largest trade association, representing more than 1
million members involved in all aspects of the residential and
commercial real estate industries.
* The Pending Home Sales Index is based on a large national sample,
representing about 20 percent of transactions for existing-home sales.
In developing the model for the index, it was demonstrated that the
level of monthly sales-contract activity from 2001 through 2004 closely
parallels the level of closed existing-home sales in the following two
months.
Source: The National Association Of
Realtors August 1st, 2005
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