The Pending Home Sales Index (PHSI) jumped 5.2 percent in October to 104.8, its highest level since March 2007, the National Association of Realtors (NAR) reported Thursday. Economists had expected a smaller increase to 100.5. The September index was revised up to 99.6 from the originally reported 99.5.
On Wednesday, the Census Bureau and HUD reported jointly new home sales—the equivalent of the PHSI—had declined an ever-so-slight 0.37 percent in October. Both reports measure contracts for the purchase of a home. The PHSI and new home sales report usually move in the same direction—each has increased in all but three months this year—but the magnitude and timing of the changes can vary. The movement in opposite directions in October suggests the PHSI was boosted by sales of foreclosed homes, which would mean continued struggles for homebuilders as buyers sift through foreclosed properties, which are counted as existing home sales. Year-over-year, the PHSI is up 13.2 percent, making October the 18th straight month of year-over-year increases. Lawrence Yun, NAR chief economist, explained the jump in the PHSI by suggesting buyers are responding to favorable market conditions, noting “[w]e’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.”
The PHSI does not distinguish distressed or short sale from other home sale transactions in the report. PHSI data are generally reflected in the report on existing home sales two months out, meaning the October PHSI points to stronger growth in completed homes sale transactions reported for December. Regionally, the October PHSI improved in two of the four Census regions, increasing 15.6 percent to 104.4 in the Midwest and 5.5 percent to 117.3 in the South. The index slipped 0.1 percent to 79.2 in the Northeast and fell 1.1 percent to 105.7 in the West. Year-over-year, the index is up in all four regions. The index is based on a large national sample, 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.