Pending home sales rose in July to the highest level in more than two years as the housing market continues showing sustained signs of recovery.

The sales index, a forward-looking indicator based on contract signings, was up 2.4 percent to 101.7 last month, its highest level since April 2010, shortly before the expiration of a home buyer tax credit, the National Association of Realtors said Wednesday.

The July figure is up 12.4 percent above the July 2011 level of 90.5.

"While the month-to-month movement has been uneven, more importantly we now have 15 consecutive months of year-over-year gains in contract activity," said Lawrence Yun, the NAR chief economist.

The data reflect contracts but not closings.

Limited inventory is constraining market activity, especially in the West, which is dealing with an "acute inventory shortage," Yun said.

Still, the other three regions experienced improvement last month.

The Northeast saw pending sales rise 0.5 percent to 77.0, 13.4 percent higher than a year ago, while the Midwest had a 3.4 percent improvement to 97.4, 20.2 percent above July 2011.

Pending home sales in the South rose 5.2 percent to 111.7, 15.6 percent above a year ago.

In the West the index slipped 1.7 percent in July to 109.9 but is 1.3 percent higher than July 2011.

Existing-home sales are projected to rise 8 to 9 percent in 2012, followed by another 7 to 8 percent gain in 2013.

Home prices are expected to increase 10 percent cumulatively over the next two years.

"Falling visible and shadow inventories point toward continuing price gains," Yun said. "Expected gains in housing starts of 25 to 30 percent this year, and nearly 50 percent in 2013, are insufficient to meet the growing housing demand."

Source: http://thehill.com/blogs/on-the-money/1091-housing/246381-pending-home-sales-hit-highest-level-in-more-than-two-years

Pending home sales declined in July but remain well above year-ago levels, according to the NATIONAL ASSOCIATION OF REALTORS®. All regions show monthly declines except for the West, which continues to show the highest level of sales contract activity.

The Pending Home Sales Index, which measures the number of home sales contracts signed, slipped 1.3% in July, but is 14.4% above the level seen in July 2010.

NAR chief economist Lawrence Yun said sales activity is underperforming. “The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy,” he said. “We also need to be mindful that not all sales contracts are leading to closed existing-home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations, and streamlining the short sales process.”

Regional pending home sales

The PHSI in the Northeast declined 2.0% in July but is 9.7% above July 2010. In the Midwest the index slipped 0.8% but is 18.8% above a year ago. Pending home sales in the South fell 4.8% but are 9.5% higher than July 2010. In the West the index rose 3.6% and is 20.6% above a year ago.

“Looking at pending home sales over a longer span, contract activity over the past three months is fairly comparable to the first three months of the year, and well above the low seen in April,” Yun said. “The underlying factors for improving sales are developing, such as rising rents, record high affordability conditions, and investors buying real estate as a future inflation hedge. It is now a question of lending standards and consumers having the necessary confidence to enter the market.”

Source: NAR