The Pending Home Sales Index (PHSI) by the National Association of Realtors® (NAR) indicated that contracts signed on existing homes gained 4.3% in August, following a 4.5% rise in July. This signals that the payback period associated with the expiration of the home buyer tax credit is now behind us.
The upturn in the PHSI was consistent across all regions except the Northeast, with solid growth in the South (6.7%) and West (6.4%) and a modest gain in the Midwest (2.1%). The Northeast declined 2.9%.
The PHSI is based on contracts signed, while existing home sales are based on closings. The NAR advises that existing home sales typically lag the PHSI by one to two months.
The latest data are “consistent with a gradual improvement in home sales in the coming months,” according to Lawrence Yun, NAR chief economist, but the “pace of home sales recovery still depends more on job creation and the accompanying rise in consumer confidence.”
At present, consumer confidence is glum, with both the Conference Board Consumer Confidence Index and the University of Michigan Consumer Sentiment index down in September. Despite a modest gain in August, the indexes has been trending noticeably downward since the middle of second quarter because of consumers’ concerns about the economy and the weak job market.
With the economy and employment expected to improve in 2011 and 2012, NAHB expects consumer confidence to improve and housing demand to gather some positive momentum.
By the fourth quarter of 2012, NAHB anticipates that existing home sales will return to normal, pre-recession levels. The four-week moving average of applications for mortgages already has risen over the last six weeks for purchase-only conventional mortgages, and for five of the last six weeks for all purchase-only mortgages.
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