Pending Home Sales Index Leaps To Multi-Year High

Homes were sold at a furious pace last month.

According the National Association of REALTORS® (NAR), the Pending Home Sales Index rose 5.2 percent in October, crossing the benchmark 100 reading, and moving to 104.8.

It's a 5-point improvement from September's revised figure and the highest reading April 2010 -- the last month of that year's federal home buyer tax credit.

October also marks the 18th consecutive month during which the index showed year-to-year gains.

As a housing market metric, the Pending Home Sales Index (PHSI) differs from most commonly-cited housing statistics because, instead of reporting on what's already occurred, it details what's likely to happen next.

The PHSI is a forward-looking indicator; a predictor of future sales. It's based on signed real estate contracts for existing single-family homes, condominiums, and co-ops. Later, when the contract leads to a closing, the "pending" home sale is counted in NAR's monthly Existing Home Sales report.

Historically, 80 percent of homes under contract, and thus counted in the Pending Home Sales Index, will go to settlement within a 2-month period, and a significant share of the rest will close within months 3 and 4. The PHSI is a predictor of Existing Home Sales.

Regionally, the Pending Home Sales Index varied in October 2012 :

• Northeast Region : 79.2; +13 percent from October 2011
• Midwest Region : 104.4; +20 percent from October 2011
• South Region : 117.3; +17 percent from October 2011
• West Region : 105.7; +1 percent from October 2011

A Pending Home Sales Index reading of 100 or higher denotes a "strong" housing market.

Of course, with rising home sales comes rising home values. 2012 has been characterized by strong buyer demand amid falling housing supplies. It's one reason why the Case-Shiller Index and the FHFA's Home Price Index are both showing an annual increase in home prices. Plus, with mortgage rates low as we head into December, the traditional "slow season" for housing has been anything but.

The housing market in Orlando is poised to end 2012 with strength. 2013 is expected to begin the same way.

Existing Home Sales Move Higher In October

After a small decline in September, Existing Home Sales rebounded in October, increasing a modest 2.1%.

The housing market's slow, steady recovery continues as sales volume in all four regions expanded last month with the exception of the Hurricane Sandy-affected Northeast.

The National Association of REALTORS® monthly Existing Home Sales Report comprises completed sales of single-family homes, townhomes, condominiums, and co-ops. The Existing Home Sales report is compiled on a seasonally-adjusted, annualized basis. It shows a 10.9 percent sales increase as compared last year.

Sales volume might otherwise be higher, however, if not for a lack of homes for sale.

Total housing inventory fell 1.4 percent to 2.14 million homes last month which, at the current sales pace, represents a 5.4-month national supply -- the lowest in more than 6 years.

The lack of supply amid burgeoning demand has led home prices higher nationwide. October's median existing home sale price was $178,600 -- an 11.1% increase from October 2011 and the eighth consecutive month during which the median sales price rose.

The last time that occurred was during the eight months ending May 2006.

In addition, the Existing Home Sales report showed that the median time on market in October rose to 71 days, up 1 day from September 2012. As compared to October 2011, however, median time on market is down 26% from 96 days.

Other noteworthy statistics from the October Existing Home Sales report include : 

• Foreclosures and short sales accounted for 24% of sales
• Foreclosures sold for an average discount of 20% to market
• Short sales sold for an average discount of 14% to market

Furthermore, thirty-two percent of homes sold in October were on the market for less than one month. 20% were on the market for six months or longer.

Record-low mortgage interest rates continue to spur housing, as do low prices. Neither will last indefinitely. If you plan to purchase a home in Orlando in 2013, therefore, consider moving up your time frame. Home ownership will likely increase in cost as the year moves on.

Pending Home Sales Index Suggests Housing Momentum Into 2013

Existing home resales are expected to finish the year strong. Last month, for the fifth straight month, the Pending Home Sales Index hovered near its benchmark value of 100, registering 99.5 in September.

The Pending Home Sales Index tracks homes under contract to sell, but not yet sold, and is published by the National Association of REALTORS®. The index is a relative one. It compares today's  housing market activity to the housing market activity of 2001 -- the index's first year of existence.

The Pending Home Sales Index has averaged 99.1 this year. Among housing market indicators, the Pending Home Sales Index is unique. It doesn't report on prior market activity as the Existing Home Sales and New Home Sales reports do. By contrast, the Pending Home Sales Index is a forward-looking indicator.

The real estate trade association tell us that 80% of U.S. homes under contract go to closing within 60 days, and many of the rest go within Months 3 and 4. In this way, the monthly Pending Home Sales Index can foreshadow to today's Orlando home buyers and sellers what's next for housing.

Based on September's Pending Home Sales Index, then, we should expect to see closed home sales stay strong through November and December. That said, home sales are expected to vary by region, especially in Florida.

Here is how the Pending Home Sales Index broke down by area last month as compared to one year ago on a seasonally-adjusted, annualized basis :

• Northeast Region : +26.1% from September 2011
• Midwest Region : +19.3% from September 2011
• South Region : +17.6% from September 2011
• West Region : +0.8% from September 2011

Often, the last few months of a year are considered to be a "slow" period for the housing market. Based on regional, annual Pending Home Sales Index improvements, though, 2012 may be different. The market looks poised to finish with momentum that may carry home prices higher into 2013.

The bottom line: For today's home buyers, mortgage rates remain low and home prices have only started to climb.