The Pending Home Sales Index, a forward-looking indicator based on signed contracts, increased 4.5% in January 2013 to 105.9, up sharply from the downwardly revised 101.3 in December. The National Association of Realtors reported that the January 2013 PHSI was 9.5% higher than the same period a year ago. The January PHSI is the highest since April 2010 when the home buyer tax credit was expiring. Prior to the tax credit, the last time the PHSI was this high was the 107.9 reached in February 2007. A PHSI reading of 100 is equal to the average level of contract activity during 2001, so today’s report describes an increasingly healthy market.
Regionally, the National Association of Realtors reported strong January and year over year PHSI increases in the Northeast, Midwest and South. In the West, the January PHSI increased only 0.1% from December, and is down by 1.5% from the same period a year ago.
The significant increase in the PHSI is consistent with yesterday’s strong increase in new home sales. The 45.3% increase in new home sales in the West from December to January contrasts with the very slight increase in the PHSI for the West in January. The NAR attributes the small monthly PHSI increase in the West to a limited inventory.
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 will likely happen to existing home sales when the contracts close in coming months. We anticipate that the February 2013 and March 2013 existing sales data will reflect today’s pending sales report, suggesting an upward trend in existing home sales as we move to spring of 2013.