Pending Home Sales Increase 1.5%; Low Inventory Crimps Sales

The National Association of Realtors released its Pending Home Sales Index Monday. The group reported that, even though pending home sales increased in March and are above year-ago levels, “contract activity in recent months shows only modest movement,” according to the National Association of Realtors. Note that the trade group does not attribute this to a lack of demand, but rather due to a lack of supply. Institutional buyers of foreclosed and other distressed properties have reduced inventories considerably in many regions. Without securing the “right” house, many would-be buyers forego purchases until they can find their desired home. The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 1.5 percent to 105.7 in March from a downwardly revised 104.1 in February. It is 7.0 percent above March 2012 when it was 98.8. (The index was created in 2001 with an initial reading of “100.”) Gains were reported in each of the four geographic regions designated by the trade group. Pending sales have been above year-ago levels for the past 23 months; the data reflect contracts signed but not closed. Not all of these signed contracts will close, due to inability to secure financing or other considerations. Total existing-home sales are projected to increase 6.5 to 7 percent over 2012 to nearly 5 million sales this year, while the national median existing-home price is forecast to rise about 7.5 percent, according to the National Association of Realtors in Monday's press release. Lawrence Yun, NAR chief economist, said the market appears to be leveling off. “Contract activity has been in a narrow range in recent months, not from a pause in demand but because of limited supply. Little movement is expected in near-term sales closings, but they should edge up modestly as the year progresses,” he said. “Job additions and rising household wealth will continue to support housing demand.”