Pending homes sales returned to their upward trend in February continuing the uneven recovery from its low mid-2010. The National Association of Realtors (NAR) announced a 2.1% increase in the Pending Home Sales Index (PHSI) in February to 90.8, following a 5.1% decline in January. 

The recovery since the low in mid-2010 at the conclusion of the home buyer tax credit has been bumpy, but contract activity has risen 20% overall.  The NAR advise that “….. in this uneven recovery it’s important to look at the longer term performance …… pending home sales have trended up very nicely since bottoming out in June ….”

The PHSI rose in all regions, with the exception of the Northeast, where poor weather conditions reduced home buyer traffic and contract activity. The PHSI fell 10.9% in the Northeast. The other regions achieved solid gains of 7.0% in the West, 4.0% in the Midwest, 2.7% in the South.

The PHSI is based on contracts signed, while existing home sales are based on the closing of contracts.  Thus, the PHSI leads existing home sales by one to two months.  The moderate rise in the PHSI can be expected to translate into a modest gain in existing home sales in March or April. This is a welcome sign, following the 9.6% decline in existing home sales in February.

The NAR expect “….existing home sales …. to rise 5% to 10% this year, with the economic recovery, job creation and excellent affordability conditions providing confidence to buyers who have been on the sidelines.”  The NAHB agrees with this assessment, with our forecasts projecting an increase of 6.1% in existing single family home sales in 2011, to 4.58 million units.