Behind the Numbers: Pending Sales Index Up

By Dawn Wotapka

Here’s a bit of good news for the existing-home market: The National Association of Realtors’ monthly index for pending sales climbed 5.1% to 94.1 in March. That is (drumroll) the highest reading since November.

It was the second-straight monthly increase for the index, which tracks agreements to purchase homes. The results beat expectations: Economists were looking for a 1.5% increase.

But, before you break out the bubbly, know that the reading is 26% below its April 2005 peak. Plus, prices, already down 30% from the peak, continue their downward spiral. The median sales price for an existing home is forecast to fall to $169,800 this year, down from $172,900 in 2010.

A reading of 100 refers to the level of sales in 2001. A sale is considered pending when the contract has been signed but the transaction hasn’t closed. Pending sales typically close within one or two months of signing.

Here’s what economists had to say:

Ian Shepherdson, High Frequency Economics: This is a pleasant, though modest surprise. We think the January and February numbers were depressed by the severe winter weather and this gain makes up those losses. … With mortgage rates dropping back in recent weeks and payrolls now rising more rapidly, we think the odds favor a modest but sustainable increase in sales in the second quarter and beyond.”

Steven Wood, Insight Economics: “This report suggests that home re-sales are likely to improve modestly but remain at a relatively low level over the next couple of months.”

Joshua Shapiro, MFR Inc.: “Broadly speaking, this index, and what it implies for actual existing home sales, is roughly back to the level that prevailed before the homebuyer tax credit temporarily distorted market trends. But, in absolute terms these remain very depressed levels, and there is considerably more territory to cover in order to call the late 2010 move anything more than a rebound from a post-tax credit air pocket.”

Alan Zibel contributed to this article.

http://blogs.wsj.com/developments/2011/04/28/behind-the-numbers-pending-sales-index-up/

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