Pending Home Sales Index Approaches “Tax Stimulus” Levels
Homes are selling ever faster.
In January, for the eight consecutive month, the Pending Home Sales Index (PHSI) surpassed its 100-value benchmark.
With a value of 105.9, the monthly metric published by the National Association of REALTORS® shows that the housing market's slow, steady recovery through 2012 will likely continue through 2013, at least.
Buying a home this year? Expect higher prices ahead.
Pending Home Sales Index : Peak Since April 2010
The Pending Home Sales Index is a monthly housing metric from the National Association of REALTORS®. It measures the number of homes which have gone into contract, but have not yet sold.
Data shows that 80 percent of such "pending" homes go to closing within 60 days of contract, with the majority of the rest going to closing within months 3 and 4.
Each home "closed" is counted toward the real estate trade group's monthly Existing Home Sales report and, because of this correlation, the Pending Home Sales Index stands as one of the housing market's lone forward-looking indicators.
The Pending Home Sales Index and its strong January reading suggests a healthy spring housing market nationwide. The index rose in all four regions :
- Northeast Region : +8.2% from the month prior
- Midwest Region : +4.5% from the month prior
- South Region : +5.9% from the month prior
- West Region : +0.1% from the month prior
The Pending Home Sales Index is now at its highest level since April 2010 -- the last month of that year's $8,000 federal home buyer tax credit.
When the Pending Home Sales Index rises, Existing Home Sales often follow.
MBA : Demand For Purchase Mortgages On The Rise
The January 2013 Pending Home Sales Index is also notable in that it scored north of 100. This is a big deal because of how the Pending Home Sales Index is "scored".
When the National Association of REALTORS® built the index, it was built to be a relative index as opposed to an absolute one. An absolute index measure raw numbers. The Existing Home Sales report is an example of an absolute index.
By contrast, the Pending Home Sales Index was baselined to the housing market of 2001, the metric's first year of existence. Pending Home Sales Index prints are always relative to that year's market. So, when the PHSI beats 100, it suggests that the housing market is "better" than it was in 2001.
2001 happened to be a very good year for housing. 2013 will be even better.
Contrast this year's housing market to the one of the last few years :
- January 2010 - January 2012 : The Pending Home Sales Index averaged 90.1
- February 2012 - January 2013 : The Pending Home Sales Index averaged 101.1
Home buyers are jumping in, bidding up homes and buying up supply. The jumbo housing market is faring especially well with broad gains in the market for homes over $500,000. Home buying activity is so strong that -- despite the lowest mortgage rates of a lifetime -- purchase loan applications are gaining share over refinances.
According to the Mortgage Bankers Association (MBA), purchase mortgage application have their highest market share since July 2010.
How Much Home Can You Afford?
It's a terrific time to be a home buyer. Although home prices are higher in many U.S. markets as compared to last year at this time, homes remain affordable because of low mortgage rates. In addition, low- and no-downpayment programs remain readily available.
The FHA's 3.5% downpayment mortgage program, and the 100% financing options available via the VA and USDA are in high-demand among first-time and repeat buyers. Even jumbo mortgage buyers are exploiting the recently-available 10% downpayment program.
See how much home you can afford. Get started with a rate quote online -- no social security number required.