The National Association of Realtors (NAR) this morning released its data on pending home sales in July. The index rose from 99.3 in June to a two-year high of 101.7. Compared with July of 2011, the pending home sales index rose 12.4%. The index reflects signed contracts, not sales closings. An index reading of 100 equals the average level of contract signings during 2001.
The 2.4% month-over-month increase surprised economists who were expecting an increase in the index of 1% in July.
The NAR’s chief economist noted:
While the month-to-month movement has been uneven, more importantly we now have 15 consecutive months of year-over-year gains in contract activity. … Falling visible and shadow inventories point toward continuing price gains. Expected gains in housing starts of 25 to 30 percent this year, and nearly 50 percent in 2013, are insufficient to meet the growing housing demand.
An inventory shortage, particularly in the West, is constraining market activity. Other regions of the country saw pending sales gains of 0.5% in the Northeast, 3.4% in the Midwest and 5.2% in the South.
The NAR projects existing home sales to rise 8% to 9% in 2012 and another 7% to 8% in 2013, while home prices rise by a total of 10% over the two-year period.