| Pending Home Sales Index Points to Continued Improvement |
| Written by Jonathan Smoke | |
| 02.03.2009 | |
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Discuss this article on the forums. (0 posts) The National Association of Realtors released the December Pending Homes Sales index reading today. The index rose 6.3% to 87.7 from an upwardly revised reading of 82.5 in November. The December reading was 2.1% higher than December 2007 when it was 85.9. Correspondingly NAR reported that the Housing Affordability Index rose 10.9% in December to 158.8, the highest national score on record. The index measures what a median income household can afford where 100 means that the median household can just afford a median priced home with 20% down at today’s average mortgage rates. At this higher level of affordability, median households can afford far more than the median home. The index goes back to 1970, so homes are now the most affordable since that time. NAR’s report suggested that pending home sales increased as more buyers took advantage of the improved affordability conditions. We haven’t seen an uptick in new home sales or builder sentiment about traffic and current conditions, but anecdotally we are starting to hear builders talk about a recent increase in traffic. HousingCrisis reported that DR Horton recently had “a huge success” in their Short Sale promotion. I took a quick look at web traffic for several public builders web sites as well as new home listing sites and found that traffic had indeed gone up for many sites in January. I've also found that web searches have increased. Take a look at the following chart of the Google Trends Search Volume Index for “New Homes” over the last 12 months. While we’ve got a long way to go to get back to the 1.0 and above level last seen in 2007, there has clearly been a marked increase in interest in new homes in the last 60 days. Will depressed demand find its Prozac in the stimulus bill? We should know in less than two weeks what will come of the wrangling in DC. 
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