Friday, October 13, 2006

Home Sales Likely To Level Out

According to the National Association of Realtors, home sales are likely to level out during the next few months.

The Pending Home Sales Index indicates sales that sill be finalized within the next couple of months. Based on the contracts signed in July, the PHSI is down 7.0% for the month. On a year-to-year basis, the index is down 16%.

An index of 100 is the average level of contract activity during 2001 -- the first year of the index. July's index was 105.6.

"In looking at year-to-year comparisons, the pending home sales index has been very close in predicting the actual pace of home sales," NAR chief economist David Lereah said.

"Based on recent changes from a year ago, the index shows existing-home sales should continue to ease after a stronger-than-expected decline in July, but are likely to flatten in the months ahead."

Lereah continued to say that psychological factors could be attributing to slowing July home sales.

"We've never seen a general decline in the housing market against a healthy economic backdrop where jobs are being created, the economy is growing and interest rates are favorable," he explained.

"Pyschological factors are causing some buyers to remain on the sidelines, waiting for prices to stabilize or for more favorable news about the market and the economy. Contributing to this hesitency is a lot of negative news stories, but in the end we believe that underlying market fundamentals will prevail."

The PHSI for the West saw a decrease of 5.5% for the month and 20.3% for the year. The South experienced a decline of 6.4% for the month and 11.3% for the year. The Northeast PHSI dropped 7.7% for the month and 15.5% for th year. The Midwest index fell by 9.0% for the month and 20.1% for the year.

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