NAR’s Pending Home Sale Index Heads Skyward in March

Dees Stribling, Contributing Editor

Washington, D.C.–The National Association of Realtors reports that its pending home sales index surged upward 5.3 percent in March to 102.9, from 97.7 in February. Compared with a year ago, when it stood at 85.0, the March 2010 index is up 21.1 percent.

The index measures housing contract activity, based on signed real estate contracts for existing single-family homes, condos and co-ops. Modeling for the index looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years.

Regionally, the Northeast declined 3.3 percent to 75.1 in March but remains 27.2 percent higher than during March 2009. In the Midwest, the index increased 1.2 percent to 98.9 and is 18.5 percent above a year ago. Pending home sales in the South jumped 12.7 percent to 121.2, which is 28.3 percent higher than March 2009, and in the West the index rose 1.9 percent to 99.9, which and is 8.8 percent above a year ago.

The obvious driver pushing the index upward was the federal tax credits for homebuyers that expired at the end of April, but the NAR asserts that there was more to it than that. In particular, the organization posits that favorable affordability conditions worked in conjunction with the tax credit to juice up the market.

Moreover, the organization predicts that despite a slowdown in sales during the immediate post-tax credit period, there are encouraging signs that the market will be able to stand on its own feet during the balance of 2010. One sign is the improvement in the availability for jumbo and second-home mortgages. Also, as bank balance sheets strengthen, lending for non-government-backed mortgages will steadily open up.

Things will be a little tougher for condos than single-family homes, however. “Although the condo market is improving, it remains oversupplied and will take longer to stabilize than the single-family market,” a spokesman for the NAR tells MHN. “For example, the supply of condos on the market was 10.5 months in March, while single-family homes stood at 7.7 months; a year ago the supply figures were 15 and nine months, respectively. A six-month supply is considered to reflect a rough balance between buyers and sellers.”