NAR’s forward-looking pending home sales index showed a very small rise in September, just 0.3 percent, but it’s one more data point to suggest the recovery is solidly underway even if it remains modest.
The rise represents the latest in a string of about half a dozen months in which pending sales have moved in a very narrow band, and that’s really what’s most informative about the latest release: it suggests that the underlying factors in the improved market are systemic and not due to just one or two transient factors.
In an interview yesterday, NAR Chief Economist Lawrence Yun said he expects home sales to be 10 percent higher than in 2011 at the end of the year, which would put home sales at close to 5 million, and prices to continue rising. Right now they’re at a median $183,900 on a national basis.
Thanks to slow but steady job growth, the improved market is expected to carry into 2013. “I wish job creation could happen much faster, but nonetheless [there’s been] nearly 5 million job creation and this is supporting the housing market this year and it will continue to support it next year,” he says.
Yun also said rising rents are helping to bring new buyers into the market. He cited NAR’s latest member survey in which 60 percent say they see rents rising in their markets, compared to 10 percent who see rents falling. That rental rate outlook should convert some renters into buyers in the coming months. “It’s a rising trend, and when the rents rise, that means that some of the renters will want to become owners, so there will be additional stimulus for the home sales,” he says.
In the 2-minute video above, Yun talks about the latest pending sales figures. Pending sales are based on contract signings, not transaction closings, so they’re considered a leading indicator—that is, they point to where sales are expected to be 2-3 months down the road.