The Pending Home Sales Index, a forward-looking indicator based on signed contracts, increased 5.9 percent in May 2012, from 95.5 in April. At this level, the PHSI equaled the level of March 2012, and reached the highest level since the expiration of the home buyer tax credit in April 2010. The May PHSI was 13.3 percent higher than in May 2011.
The National Association of Realtors (NAR) reported that the May PHSI was up in all regions from last month and last year. The monthly increases were 4.8 percent in the Northeast, 6.3 percent in the Midwest, 1.1 percent in the South and 14.5 percent in the West. The year over year increases were 19.8 percent in the Northeast, 22.1 percent in the Midwest, 11.9 percent in the South and 4.8 percent in the West. These regional numbers roughly reflect the May new home sales report, which suggested housing demand strength for the Northeast but lackluster improvement 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 when the contracts close in coming months. We anticipate that June and July existing sales that will be reported on July 19, 2012 and August 22, 2012, will reflect the strength of today’s pending sales report.