Housing Analysis, Pending Home Sales

Pending Home Sales Index Falls, But Homes Sales Are Good

July 27, 2012 by · Leave a Comment 

Pending Home Sales Index June 2012

Home sales appear headed for a mid-summer breather. 

One month after posting a multi-year high, the Pending Home Sales Index retreated to 99.3 in June.

A “pending home sale” is a home that is under contract to sell, but not yet sold. June’s value of 99.3 marks the 14th consecutive month during which the index showed year-to-year gains.

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Last year in June, the index read 90.7.

For home buyers in Schererville Indiana and nationwide, the 14-month winning streak is one worth noting — specifically because the Pending Home Sales Index is different from the other housing market data that tends to make headlines.

Unlike the FHFA’s Home Price Index, for example; or the monthly New Home Sales data which both report on how housing performed in the past, the National Association of REALTORS®’ Pending Home Sales Index looks at how housing will perform in the future.

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With high correlation, the Pending Home Sales Index predicts how Existing Home Sales will perform two months hence. This is because 80% of homes under contract convert to “closed sales” within 60 days of going into contract, and many of the rest convert within Months 3 and 4.

In addition, June’s near-100 reading is significant.

The Pending Home Sales Index is normalized to 100, a value which corresponds to the average home contract activity in 2001, the index’s first year of existence. 2001 was an historically-strong year for the housing market which means that June’s market action was also strong.

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For today’s home buyers, the Pending Home Sales Index implies that the current market is somewhat “soft” as compared to May, a scenario which lends itself to buyer-friendly negotiations.

Plus, with mortgage rates at all-time lows, home affordability has never been higher.

It’s an opportune time to buy a home in Lake County Indiana. By next month, the market may look different.

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