US pending home sales rise in July to highest level in 2 years

29 August 2012 17:52  [Source: ICIS news]

WASHINGTON (ICIS)--US pending home sales rose in July, the National Association of Realtors (NAR) said on Wednesday, reversing the downturn seen in June and reaching the highest level of activity in more than two years.

The association said that its pending home sales index (PHSI) rose to 101.7 in July, a gain of 2.4% from the June reading of 99.3.

The July index also marked a 12.4% improvement from the same month last year when it was at 90.5.

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.

Lawrence Yun, chief economist at the association, noted that the July index of 101.7 is at the highest level since April 2010 when it was 111.3. 

In that month, an unusual number of home buyers moved into the market to take advantage of a federal tax credit for residential property purchases which expired at the end of April. Pending home sales and other housing indicators later fell anew.

Yun noted that while the pending home sales index has seen ups and downs since the first of this year, the overall trend is up.

“While the month-to-month movement has been uneven, more importantly we now have 15 consecutive months of year-over-year gains in contract activity,” Yun said.

He said that existing home sales “are expected to rise 8% to 9% in 2012, followed by another 7% to 8% gain in 2013”, and that “home prices are expected to increase 10% cumulatively over the next two years”.

Yun predicted that even with a 30% improvement in home construction this year and a further 50% gain in housing starts next year, there will not be enough new homes available to meet housing demand, meaning that existing home sales will likely see strong gains as well. 

The housing market is a key downstream consumer sector for the chemicals industry, driving demand for a wide variety of chemicals, resins and derivative products such as plastic pipe, insulation, paints and coatings, adhesives, roofing materials and synthetic fibres, among many others.

Traditionally, the housing industry has always been the first economic sector to recover from a US recession. But a housing recovery has been slow to develop in the three years since the 2008-2009 “Great Recession” ended in June 2009.

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

By: Joe Kamalick
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