The Pending Home Sales Index, a forward-looking indicator, declined 2.8% to 88.9 based on contracts signed in January from a downwardly revised 91.5 in December, according to the National Association of Realtors®.
The index is 1.5% below the 90.3 level in January 2010 when a tax credit stimulus was in place. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.
Lawrence Yun, NAR chief economist, points to the broader trend. “The housing market is healing with sales fluctuating at times, depending on the flow of distressed properties coming on the market,” he said.
“While home buyers over the past two years have been exceptionally successful with historically low default rates, there is still an elevated level of shadow inventory of distressed homes from past lending mistakes that need to go through the system,” Yun said. “We should not expect the recovery to be in a straight upward path – it will zig-zag at times.”
The pace of January existing-home sales, 5.36 million, is slightly higher than NAR’s annual forecast for 2011. If contract activity stays on its present course, there should be an 8% increase in total existing-home sales this year, according to the National Association of Realtors®.
“The broad fundamentals for a housing recovery are developing,” Yun said. “Job growth, high housing affordability and rising apartment rent are conducive to bringing more buyers into the market. Some buyers may be looking to real estate as a hedge against potential future inflation.”
The Pending Home Sales in the Northeast declined 2.4% to 73.5 in January and is 3.0% below January 2010. In the Midwest, the index fell 7.3% in January to 78.0 and is 3.2% below a year ago. Pending home sales in the South rose 1.4% to an index of 97.7 but are 0.4% below January 2010. In the West, the index fell 5.2% to 98.7 and is 0.9% below a year ago.