The Pending Home Sales Index, a forward-looking indicator based on signed contracts, increased 4.1 percent in March to its highest level since April 2010 when the federal homebuyer tax credit program was ending. The March increase was on top of an upwardly revised February 2012 PHSI of 97.4, and the PHSI is now 12.8 percent above the March 2011 level. In April 2010, the PHSI reached 111.3 as first-time buyers acted on the opportunity provided by the tax credit.
The National Association of Realtors (NAR) reported that over the past year the PHSI increased strongly in all regions, despite small March declines in the Northeast and Midwest of less than 1 percent. The year over year increases were 21.1 percent in the Northeast, 16.9 percent in the Midwest, 10.6 percent in the South and 9.0 percent in the West.
If contracts closed at the same time they were signed, this graph would be the correspondence between sales and the PHSI. So the PHSI is a good indicator of what is likely to happen with existing home sales which are the contract closings. We anticipate that April and May existing sales that will be reported on May 22, 2012 and June 21, 2012, will reflect the closing of contracts signed and driving today’s very robust PHSI.