While pending home sales were down
slightly compared to September the National Association of Realtors® (NAR) said
October was the second month in a row that its Pending Home Sales Index (PHSI) bested
the previous year’s numbers and called the month’s activities “healthy.”
The PHSI was 104.1 in October, down 1.1
percent from the upwardly revised September level of 105.3. The October number is 2.2 percent higher than
the 101.9 posted in October 2013 and has remained above 100, considered an
average level of contract activity, for six consecutive months.
The PHSI is a forward-looking indicator based on contract signings. The
Index model has been found to parallel the level of closed existing-home sales
in the following two months.
Lawrence Yun, NAR chief economist, said, “In addition to low interest
rates, buyers entering the market this autumn are being lured by the increase
in homes for sale and less competition from investors paying in cash. Demand is holding steady but would be more
robust if it weren’t for lagging wage growth and tight credit conditions that
continue to hamper those individuals looking for relief from rising rents.”
The median existing-home price for all housing types in October was
$208,300, which is 5.5 percent above October 2013. Monthly 2014 median price
growth through October has averaged 5.8 percent after averaging 11.5 percent
“The increase in median prices for existing-homes has leveled off,
representing a healthier pace that has kept affordability in-check for buyers
in many parts of the country while giving more previously stuck homeowners with
little or no equity the ability to sell,” says Yun.
Yun says evidence of rising home prices allowing more willing homeowners the
ability to sell can be found in NAR’s annual survey which revealed that the
typical seller over the past year was in their home for 10 years before
selling-an all-time survey high for tenure of home.
Yun is forecasting the final numbers for existing-home sales this year to come
in at 4.9 million units, a slight drop from the 2013 total of 5.1 million units. Sales are projected to then increase to 5.3
million in 2015 and 5.4 million in 2016. Yun expects the national median
existing-home price to rise 4 percent both next year and in 2016.
The PHSI in the Northeast inched (sic) 0.5 percent to 87.9 in October, and is
now 3.4 percent above a year ago. In the Midwest the index slightly declined
0.6 percent to 100.6 in October, and is now 3.0 percent below October 2013.
Pending home sales in the South decreased 1.0 percent to an index of 118.3
in October, but is still 3.9 percent above last October. The index in the West
fell 3.2 percent in October to 98.1, but remains 4.1 percent above a year ago
The PHSI is based on a large national sample, typically representing about
20 percent of transactions for existing-home sales. An index of 100 is equal to
the average level of contract activity during 2001, the first year to be
examined which also coincidentally was found to be a typical year for sales.