Pending home sales rose sharply in October according to the Pending Home Sales Index (PHSI) released Thursday by the National Association of Realtors® (NAR). The index increased 5.2 percent to 104.8 from 99.6 in September and was 13.2 percent above the October 2011 index of 92.6. September's estimate was revised upward from the 99.5 originally reported. October's number was the highest for the index since an identical number was posted in March 2007 and is the 18th consecutive month in which the index has posted an annual increase.
The PHSI is a forward-looking indicator based on signed contracts for home purchases. The contracts are generally expected to convert to home sales within one to two months.
Lawrence Yun, NAR chief economist, said buyers are responding to favorable market conditions. "We've had very good housing affordability conditions for quite some time, but we're seeing more impact now from steady job creation, and rising consumer confidence about home buying now that home prices have clearly turned positive."
Two out of four regions reported a monthly increase on a seasonally adjusted basis with the Midwest up 15.6 percent while the South posted a more modest 5.5 percent gain. The Northeast was down 0.1 percent and the West 1.1 percent. All four regions posted annual increases; the Northeast was up 13.3 percent, the Midwest 20.0 percent, the South 17.4 percent, and the West 0.9 percent.
Yun noted there are clear regional patterns. "Contract activity surged in the Midwest and is showing very healthy gains in the South, but was down slightly in both the Northeast and West." He noted there were reasons for some of the regional discrepancies, "The Northeast saw some impact from Hurricane Sandy, but limited inventory in the West is keeping a lid on the market. All regions are up from a year ago, with double-digit gains in every region but the West."
NAR's index 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, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.
