Rising U.S. pending housing sales are evidence that the long-depressed housing market is making a rebound.
Pending home sales increased in January to their highest level in two years despite a thinning housing supply, a trade group reported Wednesday.
The Pending Home Sales Index rose 4.5 percent in January and is 9.5 percent higher than a year-ago, said the National Association of Realtors.
The index measures the number of contract signings for sales of previously owned U.S. homes and serves as an early indicator of sales to come.
The January figures are the strongest since April 2010 when appealing buyer tax credits gave home sales a temporary push. The last time the index reached these levels without tax incentives was February 2007.
The report represents the latest evidence that the long-depressed housing market is making a rebound.
“Favorable affordability conditions and job growth have unleashed a pent-up demand,” said Lawrence Yun, chief economist for the National Association of Realtors.
“Most areas are drawing down housing inventory, which has shifted the supply/demand balance to sellers in much of the country. It’s also why we’re experiencing the strongest price growth in more than seven years.”
The index was helped by strong home sales in the Northeast, which increased 8.2 percent. In the Midwest the index rose 4.5 percent from the previous month, up 17.7 percent from the year-ago period.
“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,” Yun said.
Yun anticipates 5 million existing-home sales in 2013 with prices rising by as much as 7 percent.
While affordable housing prices have helped make home ownership more attainable for many consumers, other factors still influence these figures. Some economists speculate that the data from January doesn’t necessarily indicate a sustained upward trend.
“We’re looking at a more tepidly paced growth,” Gennadiy Goldberg, a U.S strategist at TD Securities said Wednesday in a phone interview. “A main issue is that mortgage approval is still fairly weak so it doesn’t necessarily mean that this clip in pending housing sales will continue.”
Goldberg warns that high unemployment rates will continue to restrict home sales, since not all consumers have enough money to be accepted for a mortgage. He warns that more stable housing data will not be seen until the second half of the year.
“We’re looking at growth being pretty weak in the first half of year,” Goldberg said. “In the second half of the year, as unemployment rates start to improve we’ll see that reflected in housing data.”