January 12, 2012 (Chris Moore)
Home buyers who have been waiting on the sidelines watching mortgage rates fall to record lows and housing prices sinking to their lowest levels in almost a decade may finally be jumping into the market as contract signings for home purchases increased for the second consecutive month according to the National Association of Realtors® (NAR)
Contract signings rose by 7.3 percent in November as the Pending Home Sales Index (PHSI) increased from 93.3 in October to 100.1, which follows a 10.4 percent increase in October.
The increase in contract activity in November lifted the Index 5.9 percent higher than last year when it stood at 94.5. NAR said that some of the gains may have resulted from delayed contracts from buyers who recommitted after running into previous contract problems, but it was still welcome news.
Lawrence Yun, chief economist of NAR, stated, “Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines, but contract failures have been running unusually high. November is doing reasonably well in comparison with the past year. The sustained rise in contract activity suggests that closed existing-home sales, which are the important final economic impact figures, should continue to improve in the months ahead.”
Turning contract signings into closed deals continues to remain a challenge for NAR members. For the second consecutive month, nearly one in three NAR members reported at least one contract cancellation in November. (See: Contract Failures Remain Elevated for the Second Consecutive Month)
“Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage,” Yun added.
All four of the regions in the Index posted an increase in their monthly level of sales contract activity and three of the four regions were higher than the levels posted a year ago.
In the Northeast, monthly contract signings increased by 8.1 percent to 77.1 and was the only region to post a decline from a year ago of 0.3 percent. The West region posted the largest increase in monthly contract signings, rising 14.9 percent to 121.2, and was 2.9 percent higher than in November of 2010.
In the South, monthly contract signings rose 4.3 percent to 103.8 and was 8.7 percent higher than November 2010, and in the Midwest, the Index increased 3.3 percent to 91.6 and was 9.5 percent higher than a year ago.
The PHSI is a forward looking indicator which generally indicates closings one to two months in the future.
Tags: pending home sales, existing home sales, contract signings, contract cancellations