Pending home sales improved again in December, making this the fifth gain in the past six months, according to the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator, increased 2.0% to 93.7 based on contracts signed in December from a downwardly revised 91.9 in November. The index is 4.2% below December 2009, when it was 97.8.
“Modest gains in the labor market and the improving economy are creating a more favorable backdrop for buyers, allowing them to take advantage of excellent housing affordability conditions,” said Lawrence Yun, NAR chief economist. “Mortgage rates should rise only modestly in the months ahead, so we’ll continue to see a favorable environment for buyers with good credit.
“The latest pending sales gain suggests activity is very close to a sustainable, healthy volume of a mid-5 million total annual home sales. However, sales above 6 million, as occurred during the bubble years, are highly unlikely this year.”
The PHSI in the Northeast increased 1.8% to 73.9 in December but is 5.3% below December 2009. In the Midwest, the index rose 8.0% in December to 84.6 but is 5.1% below a year ago. Pending home sales in the South increased 11.5% to 101.9 and are 1.7% above December 2009. In the West, the index fell 13.2% to 105.8 and is 10.7% below a year ago.
The data reflect contracts and not closings, which normally occur with a lag time of one or two months.