Pending Home Sales Jump to Two-Year High

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.

Paul Ausick