Posted on Friday, January 7, 2011
The number of contracts signed for purchases of previously owned homes climbed again in November, according to data released by the National Association of Realtors (NAR) late last week.
The organization’s pending home sales index rose 3.5 percent based on contracts signed in November. That follows a record 10 percent jump recorded for the month of October and beat even the most modest market expectations. The median forecast in a Bloomberg News survey pegged the November figure to come in 0.8 percent above the previous month.
NAR’s data reflects contracts and not closings, which normally occur with a lag time of one or two months. Even with the recent increases, NAR says the index remains 5.0 percent below its November 2009 measurement.
NAR’s pending home sales index took a precipitous plunge during the months following the end-of-April contract deadline for the homebuyer tax credit. But the trade group’s measure of anticipated home sales subsequently rose four out of five months, rebounding by the end of November to a reading just above where it started the 2010 calendar year.
NAR describes the broad trend over the past five months as being indicative of “a gradual recovery into 2011.”
Lawrence Yun, NAR’s chief economist, attributes the recent boost in sales activity to historically high housing affordability, as well as steady improvements in the economy that have helped bring buyers back into the
market, but he added that “further gains are needed to reach normal levels of sales activity.”
The increase in the national pending sales gauge in November was carried by strong activity in the western part of the United States. In the West, the index jumped 18.2 percent on a month-to-month basis, and it was the only region where pending home sales came in above the year-ago level, up 0.4 percent from November 2009.
The Northeast also posted gains in the number of homes under contract. There, the index increased 1.8 percent from October to November but is 6.2 percent below a year earlier.
The other regions of the country didn’t fare as well. In the Midwest, NAR says the index declined 4.2 percent from the previous month, while pending home sales in the South slipped 1.8 percent.
According to Yun, if the job market adds 2 million new positions, as he says is expected in 2011, and mortgage rates rise only moderately, existing-home sales should climb to a higher – and sustainable – volume.
Yun is projecting a rise of about 8 percent in 2011 to 5.2 million units sold over the course of the year, up from 4.8 million in 2010. He’s expecting an additional gain of 4 percent in 2012.
“All the indicator trends are pointing to a gradual housing recovery,” Yun said. “Home price prospects will vary depending largely upon local job market conditions. The national median home price, however, is expected to remain stable even with a continuing flow of distressed properties coming onto the market, as long as there is a steady demand of financially healthy home buyers.”
Yun says the median existing-home price could rise 0.6 percent to $173,700 in 2011. That’d be up from $172,700 in 2010, he says, which was essentially unchanged from 2009.
“As we gradually work off the excess housing inventory, supply levels will eventually come more in-line with historic averages, and could allow home prices to rise modestly in the range of 2 to 3 percent in 2012,” Yun added.
By: Carrie Bay