Here’s Why Pending Home Sales Continued to Climb in June

According to the National Association of Realtors, The Pending Home Sales Index (PHSI), a forward-looking indicator, climbed 2.4% in June to 90.9, up from 88.8 in May. The number is up 19.8% from June 2010, which was the low point immediately following expiration of the home buyer tax credit.

This data reflects contracts, but not closings, which usually don’t occur until a month or two after contracts are signed.

The news is giving a boost to real estate stocks (NYSE:IYR), already up 0.45% today, as well as home builders stocks (NYSE:XHB), up 1.60% today.

While PHSI in the Northeast slipped 0.4% to 68.9 in June, it is still 19.4% higher than June 2010. In the Midwest the index fell 3.7% to 79.7 in June but is 26.4% above a year ago. Pending home sales in the South increased 4.4% to an index of 99.2 and are 19.1% higher than June 2010. In the West the index rose 6.4% to 107.0 in June and is 16.4% above June 2010 figures.

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National Association of Realtors chief economist Lawrence Yun said there may be some increase in closed existing-home sales. “For the majority of transactions, the lag time between pending contacts to actual closings is one to two months. Therefore, the two consecutive months of rising activity should lead to overall improvement in closed sales in upcoming months,” he said. “Though a higher than normal cancellation rate can hold back final closing figures, it could well be that some past cancellations are nothing more than delayed buying decisions rather than outright cancellations.”