The pending home sales index (PHSI) rose a seasonally adjusted 3.7 percent in October from September, the National Association of Realtors reported this week. The index is up 31.8 percent compared with last October.
The index rose 6 percent in September.
Lawrence Yun, NAR chief economist, said home sales are experiencing a pendulum swing.
“Keep in mind that housing had been underperforming over most of the past year. Based on the demographics of our growing population, existing-home sales should be in the range of 5.5 million to 6.0 million annually, but we were well below the 5-million mark before the home buyer tax credit stimulus,” he said. “This means the tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future.”
The PHSI in the Midwest the index rose 11.6 percent to 109.6 and is 36.6 percent higher than October 2008.
Yun cautioned that home sales could dip in the months ahead.
“The expanded tax credit has only been available for the past three weeks, but the time between when buyers start looking at homes until they close on a sale can take anywhere from three to five months. Given the lag time, we could see a temporary decline in closed existing-home sales from December until early spring when we get another surge, but the weak job market remains a major concern and could slow the recovery process,” Yun said. “Still, as inventories continue to decline and balance is gradually restored between buyers and sellers, we should reach self-sustaining housing conditions and firming home prices in most areas around the middle of 2010. That would mean broad wealth stabilization for the vast number of middle-class families.”
