Homes Sales

Pending Home Sales is a forward-looking indicator of home sales and rose to its highest level in more than nine years in May and may signal the housing market is gaining traction after a less than stellar start this year.

The National Association of Realtors reported this week its index of Pending Home Sales increased 0.9 percent to a seasonally-adjusted rate of 112.6, while housing economist had expected an increase of 1.2 percent for May. The lesser increase however, isn’t necessarily bad news since May was the highest level since April 2006. The index tracks contract signings, which usually close within two months.

The April index was revised down to 111.6 from 112.4.

Daniel Silver of J.P. Morgan mentioned the index was “a little softer than expectations, but the trend in the series still looks favorable, with pending sales up for five straight months through May. Last week, the National Association of Realtors (NAR) reported a strong uptick in existing home sales following a dip in April. Sales of Existing Home Sales increased 5.1 percent in May to a seasonally adjusted rate of 5.35 million homes, the highest level since November 2009. It’s worth noting that during November of 2009 was a time when government was offering significant tax credits of $8000 to first time home buyers who purchased a home in the wake of the real estate bust of 2007. Furthermore, this year’s sales have exceeded last year’s for eight straight months and currently stands at 9.2 percent over last years.

Another good sign the housing market many have turned a corner is that first-time home buyers started making their way back to the real-estate market last month. Last month we saw a  jump in homes sales was due largely in part by first-time home buyers and an expanded supply of houses, according to the Existing Home Sales report. Thirty-two percent of home buyers in May came from first time and up five percentage points from a year ago. That’s a welcomed sign for the housing market, as we historically have seen first time home buyers making up about 40 to 45 percent of the total market.

Existing home sales, which account for about 90 percent of the market, are still well below their pre-recession peak, however, when they routinely exceeded 6 million and even topped 7 million for part of 2005.

Prices have also been rising lately although the Federal Finance Housing Agency (FHFA), the agency that oversees Fannie Mae and Freddie Mac, reported that home prices related to mortgages owned by Fannie Mae and Freddie Mac held steady with a growth rate of 5.30 percent year-over-year reported in May and  was the same year-over-year home price growth rate that the agency posted in April. The median price of an existing home last month was $228,700, or 7.9 percent higher than in May 2014.

Housing affordability remains a serious concern with home-price growth increasing around four times the pace of wages.

Pending home sales rose 6.3 percent in the Northeast and 2.2 percent in the West, but fell 0.6 percent in the Midwest and 0.8 percent in the South.

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