Pending home sales gradually moving higher

The National Association of Realtors reported this morning that the Pending Home Sales Index, a forward-looking indicator that looks at contracts signed and not closings, increased 2.1% in February to 90.8.



NAR Chief Economist Lawrence Yun tried to put the best face possible on the otherwise lackluster report, noting, “Month-to-month movements can be instructive, but in this uneven recovery it’s important to look at the longer term performance.”

“Pending home sales have trended up very nicely since bottoming out last June, even with periodic monthly declines. Contract activity is now 20 percent above the low point immediately following expiration of the home buyer tax credit, he said.”

True but June’s rock-bottom low followed a burst of activity that was tied to the government’s tax credit, which helped mostly to move sales from the summer months into the spring and send the market on a roller coaster.

Sales have rebounded from the low but are not much higher than the activity we saw in early 2008 amid continued concerns about the direction of home prices and general fears among potential buyers that the market may not have bottomed.

Mortgage rates are still very favorable, which has housing affordability at or near an all-time high.  But until we see a jump in consumer confidence and a general feeling that the economy is creating employment, housing may continue to struggle.