Nationally, pending home sales for January, though higher than one year ago, were much lower than expected given that a large number of potential buyers who are eligible for the expanded home buyer tax credit. The National Association of Realtors® blames abnormal winter weather for the low rate of home sales contracts signed in January.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed. Sales are usually finalized (“closed”) within one or two months of signing. The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
This week’s release of home sales data showed the Pending Home Sales Index fell 7.6 percent to 90.4 from an upwardly revised 97.8 in December, but remains 12.3 percent higher than January 2009 when it was 80.5.
NAR forecasts a surge in the index in April when weather will be good and buyers will be facing a deadline to sign contracts by April 30 in order to claim the home buyer tax credit.
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