The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in April, rose 6.3 percent to 88.2 from a reading of 83 in March. It’s the highest index since October but remains 13.1 percent lower than April 2007, when it stood at 101.5.
The news prompted an optimistic forecast from the National Association of Realtors (NAR), which predicted home sales would make modest gains over the next couple months and improve in the second half of the year as more buyers are able to access affordable mortgages.
Lawrence Yun, NAR chief economist, said pending sales contracts have picked up notably in areas undergoing significant price drops.
“Bargain hunters have entered the market en masse, especially in areas that have experienced double-digit price declines, but it’s unclear if they are investors or owner-occupants,” he said. “Sharp price reductions are leading to a quicker discovery of price equilibrium points. The West is already seeing year-over-year gains in pending contracts.”
The PHSI in the West rose 8.3 percent to 98.8 in April and is 4 percent higher than April 2007. In the Midwest, the index jumped 13 percent to 83.7 in April but remains 13.1 percent below a year ago. The index in the South increased 4.6 percent to 88.8 but is 22.5 percent below April 2007. In the Northeast, the index declined 1.9 percent in April to 79.3 and is 12.2 percent below a year ago.
NAR’s housing affordability index has also been trending up this year and is projected to rise 15 percentage points to 128.0 for all of 2008.
“Overall affordability conditions are the best we’ve seen since the middle of the housing boom in 2004, but with far more choices and much less pressure than buyers experienced four years ago to make an investment in their future,” said NAR president Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif.
In addition, the NAR reported that the 30-year fixed-rate mortgage should rise gradually to 6.3 percent by the end of this year and then hold at that level for most of 2009.