Pending Sales of Existing Homes Rise 2%

The number of contracts signed for purchases of previously owned homes rose again in December, according to data released recently by the National Association of Realtors (NAR).

The trade group’s pending home sales index increased 2.0 percent compared to its November reading, which was revised downward.

The index is based on contracts signed in December, as opposed to closings. NAR says this forward-looking indicator typically signals where existing-home sales levels should be within one or two months.

It marks the third consecutive month NAR’s gauge of home sales to come has climbed higher. December’s gain was larger than analysts were forecasting.

Lawrence Yen, NAR's chief economist, says "Modest gains in the labor market and the improving economy are creating a more favorable backdrop for buyers, allowing them to take advantage of excellent housing affordability conditions.”

According to Yun, mortgage rates should rise only modestly in the months ahead, so conditions should remain favorable for buyers with good credit. He also says stable home prices should continue into 2011 as long as there is sufficient demand to absorb inventory.