Pending home sales rise 2.4% in June

Pending home sales remain volatile, rising again in June after an 8.2% increase the prior month and a substantial decline in April, according to the National Association of Realtors. The large trade association, which has more than 1.2 million members, said its pending home sales index, which is based on contracts signed, increased 2.4% to 90.9 for June from 88.8 for May. NAR said the index is 19.8% higher than 75.9 for the year-ago period. NAR Chief Economist Lawrence Yun said the strong pending home sales gains of the past few months bode well for coming data on existing homes sales. “For the majority of transactions, the lag time between pending contacts to actual closings is one to two months. Therefore, the two consecutive months of rising activity should lead to overall improvement in closed sales in upcoming months,” Yun said. “Though a higher-than-normal cancellation rate can hold back final closing figures, it could well be that some past cancellations are nothing more than delayed buying decisions rather than outright cancellations.” Tightened lending standards and continued global financial uncertainty remain drags on the housing economy, according to Yun, who also wants policymakers to shy away from regulations that impact homeownership opportunities. “The best way to ensure a more solid recovery in housing is to simply return to normal, sound credit standards so more creditworthy homebuyers can get a mortgage,” he said. “Washington also should not rock the boat with policy changes that would negatively impact affordable credit or otherwise increase the cost of buying or owning a home.” The NAR index in June fell 0.4% in the Northeast from the prior month, yet is 19.4% higher than a year ago for the region. Pending homes sales also rose in the South with a 4.4% increase and in the West with a 6.4% gain. The NAR pending home sales index fell 3.7% in the Midwest. The index is up considerably from a year earlier in all regions of the country. NAR expects 5 million existing home sales in 2011, a slight increase from last year. Fannie Mae Chief Economist Doug Duncan said the pending home sales data portends a stabilizing market in coming months. “However, caution should be exercised regarding this upward trend in contract signings, as these have not yet materialized into closings, which dropped in June for the third consecutive month. Low appraisals compared to contract prices and heightened uncertainty about the economic recovery may have led to increased numbers of contract cancellations,” Duncan said. The Fannie Mae national housing survey for June “showed the smallest share of consumers who expect home prices to go up, as well as the smallest share of those who expect mortgage rates to go up since monthly tracking began a year ago,” according to Duncan. He said Labor Department data showing weekly jobless claims fell below 400,000 for the first time in months is a good sign. “However, we need to see sustained declines in layoffs and, more importantly, stronger hiring before the housing market can gain traction,” Duncan said. Write to Jason Philyaw.