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Pending home sales rise to near-record level, Realtor group reports

Homebuyers took out purchase contracts on homes in May at the fastest pace since near the peak of the housing market nine years ago, the National Association of Realtors (NAR) reported.

The trade group's pending sales index rose 0.9 percent in the month to 112.6 percent, which was up just over 10 percentage points from the May 2014 level. The index is based on contract signings of roughly 20 percent of all existing home sales.

Pending sales have risen for nine consecutive months to the highest level since April 2006, when the index was pegged at 113.7, NAR said.

The gains have largely come about because of an improving job picture, the trade group said. NAR analysts expect the good times to continue into the summer, but remain concerned about rising home prices and low inventories. Rising mortgage rates also may make it harder for people to afford homes. In some markets, home prices are rising four times as fast as incomes, and inventories remain tight in some markets.

“Obviously there are a few caveats that may keep [sales] at the current pace or maybe slightly lower later in the year,” NAR Spokesman Adam DeSanctis said. “We really need to start seeing some gains in housing starts as well as current homeowners putting their homes up for sale.” 

Housing market improves on all fronts

Recent housing data has mostly been positive. Sales of newly constructed homes rose 2.2 percent in May, the Department of Commerce reported in June, another tip off that the entire housing market is gaining momentum.  

New-home sales reached an annual rate of 546,000, which is up nearly 20 percent over last year’s pace of 457,000, the agency reported. The strong new-home sales report followed data from NAR showing that existing-home sales in May reached the highest annual pace in six years, at 5.35 million.

"The housing market over the next 12 months will be a $1.3 trillion market, and I think that is a good, healthy market for the U.S.," said Jeffrey Taylor, co-founder of the mortgage risk management company Digital Risk. "People are getting more confident that jobs are being created, are going to be permanent, especially millennials. We are starting to see them really come into the housing market as they get more confident that they can balance the student loan debt as well as potentially a mortgage at a historically low interest rate."

Home prices on a national basis were up about 5.3 percent from last year, the Federal Housing Finance Agency (FHFA) reported last week. Meanwhile, roughly 1.3 million fewer homeowners were underwater on their home mortgages at the end of the first quarter compared to the same period a year ago, CoreLogic reported. 

Taylor said that the next great leap in the housing recovery will be when the private securities market returns. 

"It will be interested to see when private capital starts to come back," Taylor said. "That is the next big thing I am looking for in the next 12 months."  



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