Pending home sales showed a substantial increase in the month of May, according to a report released by the National Association of Realtors on Wednesday, with the data pointing to higher housing activity in the second half of the year.
NAR said its pending home sales index rose by 8.2 percent in May following a revised 11.3 percent drop in April. The rebound by the index reflects the strongest monthly increase since last November, when the index jumped by 10.6 percent.
A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
Lawrence Yun, NAR chief economist, said, "Absorption of inventory is the key to price improvement, and this solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace."
"Some markets have made a rapid turnaround, going from soft activity to contract signings rising by more than 30 percent from a year ago," he added.
The rebound in pending home sales in May was partly due to notable increases in pending sales in the West and the Midwest, which jumped by 12.9 percent and 10.5 percent, respectively.
Pending home sales in the Northeast and the South showed somewhat more modest increases, rising by 7.3 percent and 4.1 percent, respectively.
"Home sales still could be 15 to 20 percent higher," Yun said. "If banks would simply return to normal sound underwriting standards and begin lending to more creditworthy borrowers, we'd get a much faster recovery in the housing sector."
"In addition, a nonsensical situation has developed recently in some states with HUD unable to complete foreclosure deals because of insufficient funds to pay attorney fees at closing, even with buyers offering the full listing price," he added.
by RTT Staff Writer
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