The National Association of Realtors [NAR] reported Tuesday that its pending home sales index, a forecasting gauge on housing contract activity and one that is based on signed real estate contracts for existing single-family homes, condos and co-ops, rose 6.3% in December to 87.7.
Lawrence Yun, NAR chief economist, said “the monthly gain in pending home sales, spurred by buyers responding to lower home prices and mortgage interest rates, more than offset an index decline in the previous month.”
The Pending Home Sales Index posted a 3.7% decline in November that was revised up from an originally reported 4.0% decline.
NAR’s Housing Affordability index rose as well, adding 10.9% in December to 158.8, the highest on record. The index showed that the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.
By region, the Northeast fell 1.7% to 62.1 in December from the previous month, and is 14.5% lower YoY. The Midwest increased 12.8% to 83.7 in December from November, remaining 1.2% below December 2007. The South increased 13.0% in December from November, to 96.8 and is 1.6% higher on YoY basis. The West declined 3.7% in December, to 97.5 but remains 17.5% higher than December of fiscal 2007.
The U.S. continues coping with the worst receding housing market in decades, and many in the real estate, banking and mortgage industries are dissecting each month’s data to the minute detail looking and hoping for signs of a bottom. A hard-to-reach conclusion since the pending home sales index continues trending in a choppy fashion. Today’s report however was somewhat encouraging.
NAR President Charles McMillan said: “We can’t take our eye off the need to stimulate housing”…we need to take additional steps to meaningfully draw down inventory and stabilize home prices.”
Economists remain cautiously hopeful that the new administration’s proposed stimulus plan, together with steps by the Treasury and Federal Reserve to lower mortgage rates will support the housing sector later this year.