The National Association of Realtors says its seasonally adjusted pending home sales index rose 0.9 per cent to 112.6 last month.
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WASHINGTON: Contracts to buy previously owned USA homes rose to their highest level in just over nine years in May, in a further boost to the housing market and the broader economic outlook. A one- to two-month lag usually exists between a contract and a completed sale.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes.
“We think the housing market can cope with slightly higher mortgage rates, taking home sales to new post-crash highs over the next few months”, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
“Realtors are saying foot traffic remains elevated this spring despite limited – and in some cases severe – inventory shortages in many metro areas”, he said.
But a continued lack of available homes for sale is pushing up prices at a rapid rate.
Adds Yun, “As a result, home prices are up and accelerating in many markets”.
Economists estimate that pending sales rose 1.1% month-over-month, a slowdown from 3.4% in April, according to Bloomberg.
The data from the National Association of Realtors include transactions in which a contract has been signed, but not yet concluded.
Taylor said that the next great leap in the housing recovery will be when the private securities market returns. Groundbreakings on new homes fell 11.1% in May compared to April but building permits hit a new eight-year high.
But existing home sales, which account for about 90% of the market, are still well below their prerecession peak, when they routinely exceeded 6 million and even topped 7 million for part of 2005. The index in the West rose 2.2% in May to 104.5, and is 13.0% above a year ago.
Last Monday, NAR released a separate report showing that existing home sales increased by more than expected in May, with sales jumping to their highest level in almost six years.
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However, Yun warns that this year’s stronger sales – coming with similarly tight housing supplies from a year ago – have caused home prices to rise to an unhealthy and unsustainable pace.
