The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 4.5 percent to 105.9 in January from a downwardly revised 101.3 in December and is 9.5 percent above January 2012 when it was 96.7. The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The January index is the highest reading since April 2010 when it hit 110.9, just before the deadline for the home buyer tax credit. Aside from spikes induced by the tax credits, the last time there was a higher reading was in February 2007 when it reached 107.9.
Over the near term, rising contract activity means higher home sales, but total sales for the year are expected to rise less than in 2012, while home prices are projected to rise more strongly because of inventory shortages. This means the continuation of the sellers market, at least for the near term.
NOTE: Existing-home sales for February will be reported March 21 and the next Pending Home Sales Index will be on March 27.