Pending home sales reached the third highest level on record in June, the National Association of Realtors announced this week.
The trade group’s Pending Home Sales Index rose 0.6 percent in June to a reading of 126.3, which is 3.6 percent higher than June 2004.
The index is based on pending sales of existing homes, including single-family and condos. A sale is pending when the contract has been signed but the transaction has not closed. Pending home sales typically close within one or two months of signing, the association reported.
An index of 100 is equal to the average level of contract activity during 2001, the first year to be analyzed and the first of four consecutive record years for existing-home sales. Sales in 2001 are fairly close to the higher level of home sales expected in the coming decade relative to the norms experienced in the mid-1990s, the association reported, so that an index of 100 coincides with a historically high level of home sales activity.
The Pending Home Sales Index is based on a national sample that represents about 20 percent of transactions for existing-home sales. In developing the model for the index, the association has demonstrated that the level of monthly sales-contract activity from 2001 through 2004 closely parallels the level of closed existing-home sales in the following two months.
David Lereah, NAR’s chief economist, said the index shows historic levels of home sales will continue in the near future. “Existing-home sales will stay in record territory for transactions in July and August,” he said. “There is some volatility to the index due to the short history of seasonal factors, so we’re not predicting another record month, but it certainly is possible.” Existing-home sales in June were at the highest level on record.
Regionally, the index increased 3.5 percent in the West to 128.9 in June, and was 7.3 percent higher than June 2004. The index in the Midwest rose 0.7 percent to 116.3 in June, but was 1.7 below a year ago. In the South, the index increased 0.4 percent to 138, and was 6 percent higher than June 2004. The Northeast index fell 3.2 percent to 113.2 in June, but was 0.9 percent higher than a year earlier.
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