Pending home sales increase in March; prediction is for an increase in existing home sales this year

Dennis Norman

The National Association of REALTORS Pending Home Sales Index for March shows an increase of 5.1 percent in the index from the month before (seasonally adjusted), and a 11.4 percent decrease from a year ago. This is the third-consecutive month over month increase for the pending home sales index.

Here are highlights from the report for March 2011:

• The pending home sales index (seasonally adjusted) was 94.1 (the index is based upon 100.0 being equal to the average level of sales activity in 2001 which we could call the last “normal” year) which is a 5.1 percent increase from the month before and an 11.4 percent decrease from a year ago.
• The”not-seasonally adjusted” index index was 105.9, a 34.1 percent increase from the month before and an 11.5 percent decrease from a year ago.
• The Northeast region was the only region that had a month-over-month decrease (marking the fourth-consecutive month of declines for the region) with a 3.2 percent decrease (seasonally adjusted). The South had the largest month-over-month increase with a 10.3 percent increase, followed by the West with a 3.1 percent increase and the Midwest with a 3.0 percent increase.
• All regions saw year over year declines.

Lawrence Yun, NAR chief economist for the National Association of REALTORS, said home sales activity has shown an uneven but notable improvement. “Since reaching a cyclical bottom last June, pending home sales have posted an overall gain of 24 percent and demonstrate the market is recovering on its own,” he said. “The index means modest near-term gains in existing-home sales are likely, which would be even stronger if tight mortgage lending criteria returned to normal, safe standards.”

“Based on the current uptrend with very favorable affordability conditions, rising apartment rents and ongoing job creation, existing-home sales should rise around 5 to 10 percent this year with sales growth of lower priced homes likely to outperform high-end homes. That means the price trend will reflect more homes sold in the lower price ranges,” Yun said.

“The good news is that recent home buyers are staying well within budget, leading to exceptionally low loan default rates among home buyers over the past two years,” Yun added.

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