In May, pending home sales reached their highest level in nearly a decade. This strongly indicates that the announcements made last week of strong new and existing home sales across the country is likely to be continued into the summer months of June, July and possibly beyond. The NAR (National Association of Realtors) announced that there was a rise of nearly one percent (0.9%) in home sales when using its Pending Home Sales Index (PHSI) as a measure. This represented a rise between April and May from 111.6 to 112.6. This encouraging news was released before one survey’s prediction of a 0.6 increase was published. However, the figure is lower than that of the Reuters Poll, which suggested an increase of 1.2 percent.
The upswing in the Pending Home Sales Index now has it sitting at 10.4 percentage points higher than it was 12 months ago. It marks the ninth successive year where the Index has been higher than the previous year. The PHSI is currently as high as it has been at any time since April 2006 when it was 1.1 percent higher than it is now, coming in at 113.7.
Hitting 112.6 on the PHSI represented a 5th month in a row where gains were made against the previous month’s score. A top economist from the National Association of Realtors, Mr. Yun, said that this positive figure strongly suggests that home sales are going to have their most successful year since the housing crisis of several years ago. He further stated that continuing growth in employment levels has aided the demand for housing, and that the continuing recovering across multiple sectors all bodes well for the housing market.
The Pending Home Sales Index is one of the most important indicators as to the conditions of the market, both now and into the coming months. It’s based on the signing of contracts for home purchases, which normally results in a completed sales within 2 months.
However, the outlook is not 100% positive, as Yun points out, to rising sales against non-changing prices perhaps leading to affordability issues. He further states that he believes this may damage the hopes many renters have of transitioning to home ownership.
Across the regions of the US, month-on-month growth was not equally positive in every region. However, all regions showed positive growth on an annual basis. The most successful region in terms of growth was the Northeast, which showed annual growth of 10.6 percent and monthly growth of 6.3 percent. The Midwest was down more than half a percent when compared with the April data, however it was still up 7.8 percent when looked at annually. Similarly, the South decreased 0.8 percent between April and May, but stood up over 10 percent annually. The West had a positive showing with monthly growth in its PHSI score of 2.2 percent alongside a 13 percent annual rise.
Following on from this data, it was reported by Bloomberg that the signs are there that the strong performance in the housing market will continue. It states that the strength of the jobs market, alongside the potential for rise in rates, is presently encouraging a lot of people into the market.
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