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US Pending Home Sales Reach 18-Month High: NAR

H.S. Borji
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Contracts to buy existing homes rebounded in January, rising to the highest level since August 2013 in the latest sign more plentiful jobs and better credit conditions were boosting buyer demand.

The pending home sales index, a forward-looking indicator of US home sales, rose 1.7 percent to 104.2 in January, following a 3.7 percent drop in December, the National Association of Realtors reported today. The median estimate of economists called for an increase of 1.8 percent.

Compared to January 2014, contracts to buy existing homes were up 8.4 percent. That was the fifth consecutive month pending home sales were above year-ago levels.

January was also the ninth consecutive month the pending home sales index was above 100.0, which represents the average level of contract activity.

Compared to December contract activity increased in three of four regions. The pending home sales index increased 0.1 percent in the Northeast, 2.2 percent in the West and 3.2 percent in the South. The index declined 0.7 percent in the Midwest, NAR data showed.

Pending home sales reflect contract activity for existing single-family homes, which is the largest segment of the residential real estate market. They allow economists to determine the pace of existing home sales, which are based on contract closings.

“Contract activity is convincingly up compared to a year ago despite comparable inventory levels,” said NAR chief economist Lawrence Yun in a statement. “The difference this year is the positive factors supporting stronger sales, such as slightly improving credit conditions, more jobs and slower price growth.”

He added, “All indications point to modest sales gains as we head into the spring buying season. However, the pace will greatly depend on how much upward pressure the impact of low inventory will have on home prices. Appreciation anywhere near double-digits isn’t healthy or sustainable in the current economic environment.”

The NAR expects existing home sales to be around 5.26 million in all of 2015, up 6.4 percent from last year. The median sale price for existing homes is forecast to rise nearly 5 percent over year-ago levels.

Earlier this week the NAR said existing home sales fell sharply in January, as tighter inventory levels and higher price points weighed on buyer activity. Existing home sales tumbled 4.9 percent to a seasonally adjusted annual rate of 4.82 million. Sales were down in all four regions, led by a 7.1 percent plunge in the West.

Inventory levels increased half a percent to 1.87 million. At the current sales pace, it would take 4.7 months to clear existing inventories.

On Wednesday the Commerce Department reported a slight drop in new home sales in January. The sale of new homes fell 0.2 percent to a seasonally adjusted annual rate of 481,000, holding steady near multi-year highs. December’s sales pace was revised up to 482,000, the highest level since June 2008.

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