Roaring Pending Home Sales Index Puts 2013 Home Buyers On The Clock

The housing recovery is underway. From San Jose, California; to Detroit, Michigan; to Dade County, Florida, the lowest mortgage rates in a lifetime have offset rising U.S. home prices, giving renters a reason to buy and investors hope for the future.

Nationwide, homes are headed under contract at the quickest pace since the tax-credit-stimulated periods of 2009 and 2010.

Click here to get today’s mortgage rates.


Pending Home Sales Index : A Different Indicator Type

The Pending Home Sales Inde (PHSI) is a monthly report, published by the National Association of REALTORS®. It measures homes under contract, but not closing. In this way, the Pending Home Sales Index is a forward-looking housing market indicator.

Unlike the Existing Home Sales report, for example; or the FHFA’s Home Price Index which both report on how the housing market performed during some period in the past, the Pending Home Sales Index uses current contract data to predict what may happen in housing’s future.

In November 2012, the Pending Home Sales Index rose nearly 2 percent from the month prior to 106.4. November’s data marks the 19th straight month for which the PHSI improved, a streak that’s raised the index to its highest point since April 2010 — the last month of that year’s federal home buyer tax credit.

As compared to last year, the Pending Home Sales Index is higher by 10%.

Click here to get today’s mortgage rates.

Foreshadows Rising Home Prices For 2013

The Pending Home Sales Index tracks homes under contract and, according to NAR, 80% of homes under contract close within 60 days with the remaining majority closing within months 3 and 4.

As a result, the Pending Home Sales Index correlates highly with the Existing Home Sales, which reports on actual home closings.

To use a real-life example :

  • September 2012 : Pending Home Sales Index showed 14.9% gain from September 2011
  • November 2012 : Existing Home Sales showed 14.5% gain from November 2011

With the Pending Home Sales Index up 10 percent from one year ago, it’s reasonable to expect that home resales will rise by a similar amount. This would put the 2013 annual home sale tally near 5.1 million.

As home sales rise amid a constricted supply, home prices are expected to rise.

Click here to get today’s mortgage rates.

Get A Mortgage Pre-Approval

The Pending Home Sales Index tells us that the 2013 housing market is going to start strong. Home resales will be high in January, and momentum will carry through the winter months.

Plus, with mortgage rates rising, it’s reasonable to think more renters will join the 2013 home buying market. Rising mortgage rates create urgency, and renters often have fewer obstacles to homeownership than existing homeowners who must often first sell a “trailing home”, for example.

The FHA offers a low-downpayment mortgage and the VA provides 100% financing. Check today’s mortgage rates to know “How much home can you afford?”. You can do it online, for free.


Realtor with Greg Garrett Realty, actively licensed in the state of Virginia

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