The National Association of Realtors (NAR) this morning released its data on pending home sales in June. The index fell from a downwardly revised figure of 100.7 in May to 99.3 in June. Compared with June of 2011, the pending home sales index rose 9.5%. The index reflects signed contracts, not sales closings. An index reading of 100 equals the average level of contract signings during 2001.
The NAR’s chief economist noted:
We’ve been seeing a steady decline in the level of housing inventory, which is most pronounced in the lower price ranges popular with first-time buyers and investors. … Housing starts will likely need to double over the next two years to satisfy the pent-up demand for both rentals and ownership.
Economists were expecting an increase in the index of 0.9% in June. The drop may be attributable to the lower inventory level. The NAR noted that the release of bank-owned properties (REOs) “should be released expeditiously to help meet the market demand.”
The NAR’s buyer traffic index for June was 60, while the seller index was just 41. That indicates that there were significantly more buyers than sellers, adding to the inventory shortage. With mortgage rates at historically low levels, refinancings are adding to delays in closing higher numbers of home sales.
Recent earnings reports from homebuilders, including PulteGroup Inc. (NYSE: PHM) which reported solid second-quarter numbers this morning, indicate that builders are busy chasing the pent-up demand that NAR describes.