The Pending Home Sales Index improved 4.5% to 105.9 for January, according to a National Association of Realtors (NAR) report released today. After dropping by a revised 4.7% for December, this newest report signals improvement for the housing market. Market analysts had predicted a rise, but their 3% estimate undervalued January's boost.
The index is based on contract signings (with sales usually finalized one or two months later) and is benchmarked to 2001 contract activity. (An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined by the association.) Pending sales have been above year-ago levels for the past 21 months and January 2013 clocked in 9.5% above the previous January.
"Favorable affordability conditions and job growth have unleashed a pent-up demand," said NAR Chief Economist Lawrence Yun in a statement today. "Most areas are drawing down housing inventory, which has shifted the supply/demand balance to sellers in much of the country. It's also why we're experiencing the strongest price growth in more than seven years."
On a regional level, the Midwest index has improved the most since January 2012, up 17.7%. Pending home sales in the South pushed its index up 11.3%, while the Northeast clocked 10.5% gains. In the West, supply side constraints have pushed pending home sales down 1.5% in the last year.
Looking ahead, Yun expects total 2013 sales to improve less than last year, although tight supplies will most likely push home prices higher.
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