Nationally Home Sales Hits Record But Some Markets In Decline!
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October 5, 2005 – Pending home sales rose to a record level in
August 2005, defying some expectations of a cooling market, according to
the National Association of Realtors®. However, a close
examination of the figures reveals some regional markets are cooling!
The Pending Home Sales Index1, based on contracts signed in
August, rose 3.2% to a reading of 129.5, and is 4.7% higher than August
2004. The previous record was 128.1 in October 2004.
The index, which is a leading indicator for the housing sector, is
derived from pending sales of existing homes. A sale is described as
pending when the contract has been signed but the transaction has not
been finalized. Pending home sales typically close within one or two
months of signing.
David Lereah, NAR’s chief economist, said strong demand and favorable
market conditions are driving home sales, but the cloud of Hurricane
Katrina is hanging over some of the data. “Home sales remain at
remarkable levels, but there is ambiguity regarding pending home sales
in parts of the South since many transactions in the disaster zone will
be postponed. It’s unclear how much of that disruption may be offset
by spiking sales in surrounding areas,” he said. “Even so, national
sales should stay close to record levels over the next two months and
housing will continue to support the economy.”
Direct data from many hard-hit areas will be unavailable until affected
multiple listing services are restored to operation. An estimated 28,000
Realtors® lost homes and businesses in Katrina. The Realtors®
Relief Foundation has collected nearly $4.8 million to provide emergency
relief for hurricane victims. Funds are targeted for homeowners and
affected NAR members alike.
A Pending Home Sales Index of 100 is equal to the average level of
contract activity during 2001, the first year to be analyzed, and was
the first of four consecutive record years for existing-home sales.
Sales in 2001 were fairly close to the higher volume of home sales
expected in the coming decade, well above the levels that were seen in
the mid-1990s, so an index of 100 is considered to be historically
strong.
Regionally, the PHSI in the West rose 7.6% to 136.7 in August and was
8.7% higher than August 2004. The index in the Midwest increased 2.8% to
a level of 119.4, and was 0.5 above a year ago. In the South, the index
rose 2.2% to 142.1, and was 7.6% higher than August 2004. However, the
Northeast index declined 0.5% to 108.5 in August, and was 2.2% lower
than a year ago.
1 The Pending Home Sales Index is based on a large national sample,
typically 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.
Existing-home sales for September will be released October 25; the next
Pending Home Sales Index will be on November 3.
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