National Pending Home Sales Turn Around in May: Following Flagler Trend
Palm Coast’s real estate market continues showing signs of strengthening; sales up, pending contracts up, days on market down.
Palm Coast, FL – June 29, 2011 – The National Association of Realtors® released its monthly Pending Home Sales Index. The index rose in May showing gains in all regions. It also represented the first time since April 2010 that contract activity was above that of the same month a year earlier.
Palm Coast and Flagler County
The Palm Coast area market (all of Flagler County) has been showing strength for the entire second quarter. With days remaining before the final monthly tally is in, sales of single-family homes have already surpassed June 2010’s level. The inventory of homes listed for sale on MLS is running in the 1,120 to 1,130 range. Pending contracts have been consistently above 500 since the last week of April. Days on Market is below 110, down from the 140 to 150 a year ago.
National
Of particular note is the strengthening in some Northern cities; Hartford, Indianapolis, Minneapolis, Houston, and Seattle. Southern markets rely, in part, on the ability of potential buyers to be able to sell their existing homes first. Pending home sales rose strongly in May with all regions experiencing gains from a year ago, pointing to higher housing activity in the second half of the year, according to the National Association of Realtors®.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, rose 8.2 percent to 88.8 in May from an upwardly revised 82.1 in April and is 13.4 percent higher than the 78.3 reading in May 2010. The data reflects contracts but not closings, which normally occur with a lag time of one or two months.
This is the first time since April 2010 that contract activity was above year-ago levels, and the monthly gain was the strongest increase since last November when the index rose 10.6 percent.
Lawrence Yun, NAR chief economist, said the improvement bodes well for home prices. “Absorption of inventory is the key to price improvement, and this solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace,” he said. “Some markets have made a rapid turnaround, going from soft activity to contract signings rising by more than 30 percent from a year ago, including areas such as Hartford, Conn.; Indianapolis; Minneapolis; Houston; and Seattle.”
Pending home sales have trended up unevenly since bottoming last June, rising in seven of the past 11 months. “Home sales still could be 15 to 20 percent higher,” Yun said. “If banks would simply return to normal sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector.”
“In addition, a nonsensical situation has developed recently in some states with HUD unable to complete foreclosure deals because of insufficient funds to pay attorney fees at closing, even with buyers offering the full listing price,” Yun added.
The PHSI in the Northeast rose 7.3 percent to 69.2 in May and is 4.4 percent above a year ago. In the Midwest the index jumped 10.5 percent to 82.8 and is 17.2 percent higher than May 2010. Pending home sales in the South increased 4.1 percent to an index of 95.0 in May and are 14.6 percent higher than a year ago. In the West the index surged 12.9 percent to 100.6 and is 13.5 percent above May 2010.
Yun cautioned that healthy job creation is necessary to ensure a solid recovery in both housing and the overall economy. “The job market has sputtered recently, and because variations in local job creation impact housing demand, markets will recover unevenly around the country,” he said.
*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.
Leave a Reply
Want to join the discussion?Feel free to contribute!