Pending home sales bounced back in May, matching the highest level in the past two years, and are well above year-ago levels, according to the National Association of Realtors (NAR). Both monthly and annual gains were seen in every region.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 5.9 percent to 101.1 in May from 95.5 in April and is 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 when buyers were rushing to beat the deadline for the home buyer 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,” he said. “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 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.
Low inventory could hold back some contract activity, however, as this month’s existing-home sales numbers indicate.
“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.”
NAR estimates 85 percent of homeowners have positive equity, with 15 percent in an underwater situation.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 1.5 percent to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April, but are 9.6 percent above the 4.15 million-unit pace in May 2011.
“The slight pullback in monthly home sales is more likely due to supply constraints rather than softening demand. The normal seasonal upturn in inventory did not occur this spring,” Yun said. “Even with the monthly decline, home sales have moved markedly higher with 11 consecutive months of gains over the same month a year earlier.”
There are broad-based shortages of inventory in the lower price ranges in much of the country except the Northeast, and in the West, supply is extremely tight in all price ranges except for the upper end. Widespread inventory shortages also are found in much of Florida.
Total housing inventory at the end of May slipped 0.4 percent to 2.49 million existing homes available for sale, which represents a 6.6-month supply at the current sales pace; there was a 6.5-month supply in April. Listed inventory is 20.4 percent below a year ago when there was a 9.1-month supply. Unsold inventory has trended down from a record 4.04 million in July 2007; supplies reached a cyclical peak of 12.1 months in July 2010.