US pending home sales gain 2% in Jan, suggesting further recovery

27 February 2012 16:06  [Source: ICIS news]

WASHINGTON (ICIS)--US pending home sales rose by 2% in January from December, giving further support to industry hopes for stronger sales through this year, the National Association of Realtors (NAR) said on Monday.

The association said that its pending home sales index rose to 97 in January from the 95.1 reading in December.

That January increase in part offset the 5% decline recorded for pending home sales in December from November.

NAR chief economist Lawrence Yun said that while the pending sales index has seen ups and downs in recent months, it is nonetheless showing meaningful improvement since reaching a low point in April 2011.

January’s index reading of 97 also is the highest measure since April 2010 when it reached 111.3 as shoppers were taking advantage of a federal tax credit stimulus for home buyers.

The January reading also is 8% higher than in the same month of last year, Yun noted.

A residential property sale is listed as “pending” when a contract has been signed but the transaction has not been closed and funded with a mortgage loan. A pending sale usually closes within a month or two of contract signing.

The association's pending sales index is seen as a reliable, forward-looking indicator for near-term expectations in the US housing sector.

The index is measured against the 100 baseline set by the NAR in 2001 to represent an average or healthy pace of pending home sales contracts.

Yun said that the course of the pending home sales index over recent months is “a hopeful indicator”.

“Given more favourable housing market conditions, the trend in contract activity implies we are on track for a more meaningful sales gain this year,” Yun said.

The housing industry is a key downstream consumer for chemicals, especially the construction of new homes, which drives demand for a wide range of chemicals, resins and derivative products.

While sales of existing homes do not generate a parallel demand for chemicals, those sales do take homes off the market, reducing the number of available properties. That, in turn, helps build demand for new residential construction.

“Movements in the index have been uneven, reflecting the headwinds of tight credit, but job gains, high affordability and rising rents hopefully are pushing the market into what appears to be a sustained housing recovery,” Yun said.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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