Pending Home Sales Near 10-Year High

Pending home sales rose by 1.3 percent in July and reached their second-highest reading in more than 10 years, the National Association of Realtors reported yesterday.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose to 111.3 in July from a downwardly revised 109.9 in June and is came in 1.4 percent higher than a year ago (109.8). Only the April reading (115.0) has been higher since 2006.

Regionally, only the Midwest saw a downturn, dipping by 2.9 percent to 105.8 in July; pending sales there were 1.1 percent lower from a year ago. The West surged by 7.3 percent in July to 108.7, and by 6.2 percent from a year ago. The Northeast rose by 0.8 percent to 96.8 in July and by 1.1 percent from a year ago. The South inched higher (0.8 percent) to 123.9 in July by 0.4 percent from a year ago.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., noted June’s modest gain was revised lower, however, hinting that existing home sales may not quickly recoup July’s 3.2 percent drop.

NAR Chief Economist Lawrence Yun said tight inventories continue to hamper the market. “More home shoppers having success is good news for the housing market heading into the fall, but buyers still have few choices and little time before deciding to make an offer on a home available for sale,” he said. “There’s little doubt there’d be more sales activity right now if there were more affordable listings on the market.”

Yun said the jump in the West last month–the highest in more than three years–stemmed largely from stronger labor market conditions. “If home building increases in the region to tame price growth and alleviate the ongoing affordability concerns, the healthy rate of job gains should support more sales,” he said.

Yun added that recent residential construction data show the size and cost of new homes moved downward over the past year, suggesting homebuilders are beginning to shift away from building larger, more expensive homes for the upper end of the market to focusing more on properties geared for buyers in the middle and lower price tiers.