Narrow gain in Sep US pending home sales signals growth ahead

25 October 2012 17:59  [Source: ICIS news]

WASHINGTON (ICIS)--US pending home sales rose narrowly in September from August, the National Association of Realtors (NAR) said on Thursday, noting that the small gain suggests only minor movement in near-term housing transactions.

The association said that its pending home sales index (PHSI) rose by 0.3% in September to 99.5 compared with the August reading of 99.2.

However, the index shows that pending real estate sales continue to exceed year-ago levels, with September’s pace 14.5% higher than the index seen in the same month of 2011.

Pending home sales have seen year-over-year gains for 17 straight months, the association said, indicating a “solid recovery” in final residential sales for this year.

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.

NAR chief economist Lawrence Yun said that while the pace of pending home sales growth in September was modest, “home contract activity remains at an elevated level in contrast with recent years”.

He noted that recent monthly data on pending home sales show that activity “appears to be bouncing around in a narrow range”.

“This means only minor movement is likely in near-term existing home sales,” he said, but added: “With positive underlying market fundamentals, they should continue on an uptrend in 2013.”

The US housing sector is a key downstream consuming industry for chemicals, resins and derivative products. Although new home construction activity is the principal consumer of chemicals and resins, improvements in sales of existing homes are important because they help clear the market for new housing development.

The steady pace of pending home sales comes amid other signs of what is now seen as a definitive housing sector recovery.  Housing starts are up sharply, new home sales have improved, and home builder confidence has shown continued improvement over six months.

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

By: Joe Kamalick
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