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November Pending Home Sales Index Reaches 31-Month High

The Pending Home Sales Index (PHSI) increased for the third straight month in November, improving 1.7 percent to 106.4, the ""National Association of Realtors (NAR)"":http://www.realtor.org/news-releases/2012/10/november-pending-home-sales-rise-again reported Friday. Economists had expected a slightly fast, 1.8 percent increase to 106.7.

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The index, the NAR said, is at its highest level since April 2010.

The index for October was revised down to 104.6 from the originally reported 104.8, making the November growth even larger.

""The upward momentum [in the PHSI] means existing-home sales should rise 8 to 9 percent in 2013 to approximately 5.1 million, following a 10 percent gain expected for all of 2012,"" the NAR said. ""The median existing-home price is projected to rise just over 4 percent in 2013, after rising more than 7 percent in 2012."" For November, NAR reported sales of existing single homes rose to 5.04 million, the highest level in three years.

On Thursday, the Census Bureau and HUD reported jointly new home sales ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the equivalent of the PHSI ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô had increased 4.4 percent in November, also to its highest level since April 2010 Sales for both new and existing homes in 2010 were stimulated by the federal homebuyer tax credit program which required a closing by June of that year. The PHSI and new home sales reports measure contracts for the purchase of a home.

The PHSI and new home sales report usually move in the same direction ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô each has increased in all but three months this year ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô but the magnitude and timing of the changes can vary. That new home sales grew in November at a faster pace than the PHSI suggests the available homes for sale include a large number of distressed properties, discouraging buyers. The PHSI does not distinguish distressed or short sale from other home sale transactions in the report.

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Indeed, distressed homes - foreclosures and short sales sold at deep discounts - accounted for 22 percent of November sales (12 percent were foreclosures and 10 percent were short sales), down from 24 percent in October and 29 percent in November 2011. Those discount categories have represented almost 30 percent of existing home sales this year.

With the November increase, the PHSI is up 9.8 percent year-over-year, the 19th straight month of year- year increases, but the weakest year-over-year improvement since June.

PHSI data are generally reflected in the report on existing home sales one or two months out, that is the November PHSI points to stronger growth in completed homes sale transactions reported for December or January. The 5.9 percent increase in existing home sales in November followed a 5.0 percent increase in the PHSI in October.

The PHSI in the Northeast rose 5.2 percent to 83.3 in November and is 15.2 percent above a year ago. In the Midwest the index edged up 0.1 percent to 103.8 in November and is 15.2 percent above November 2011. Pending home sales in the South were unchanged at an index of 117.2 in November and are 13.9 percent higher than a year ago. In the West the index rose 4.2 percent in November to 110.1, but is 3.2 percent below November 2011 with inventory constraints limiting sales. November marked the first time since May the index improved in all four census regions.

The index is based on a large national sample, representing about 20 percent of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.

_Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:40 am and again at 9:40 am eastern time._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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