Contract signings for home purchases had a strong month in November, gaining 7.3% from October, according to data released today from the National Association of Realtors (NAR). The uptick brought NAR’s Pending Home Sales Index up to a reading of 100.1 for the month, a 5.9% increase from November 2010. (A reading of 100 indicates the average level of pending sales set in 2001, when NAR began its index.)
The reading is the highest the index has seen since April 2010, when signings surged under pressure from the expiring home buyer tax credit.
The numbers should be taken with a grain of salt, however, partly due to the fact that cancellation rates have been in the 30% range in recent months, about three times the level seen last year. As pending sales represent contracts and not closings, final sales are not a sure bet.
The high cancellation rate in recent months may also be responsible for November’s surge, says Lawrence Yun, chief economist at NAR. "Someone who was looking to buy a home, they sign a contract, the deal falls through. I suspect that this buyer is probably searching for another home and signing another contract, so we may be seeing … that these people are reentering," he said in a video posted on NAR’s website today.
On a regional basis, contracts were strongest in the West, where the index surged 14.9% to a reading of 121.2 in November, 2.9% higher year-over-year. The Northeast gained 8.1% to a reading of 77.1, but was down 0.3% on a yearly basis. The South rose 4.3% for the month to an index reading of 103.8%, up 8.7% annually. And the Midwest was up 3.3% on a monthly basis to a reading of 91.6%, up 9.5% from the previous year.
By product type, the lower end of the price scale is performing far better than the higher end, according to NAR’s data based on November’s closings. Sales of homes priced at $100,000 or less are up about 18% year-over-year. That improvement moved down to about 11% for the $100,000 to $250,000 range, and then continues downward as prices go up. All price categories of $500,000 or more are in negative territory annually.
Claire Easley is a senior editor at Builder.