New home contracts rose again in August

Not all contracts turn into sales

Washington – The National Association of Realtors today reported pending home sales continued their upward streak for the seventh straight month.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in August, climbed 6.4% to 103.8 from a reading of 97.6 in July. Year-over-over, the index was up 12.4% over August 2008. The index is at the highest level since March 2007 when it was 104.5.

An index of 100 is equal to the average level of contract activity during 2001.

The August results mark the longest series of consecutive month-over-month gains since the index began in 2001, according to the association.

But not all contracts have been converted into closed sales, the association warned.

“The rise in pending home sales shows buyers are returning to the market and signing contracts, but deals are not necessarily closing because of long delays related to short sales, and issues regarding complex new appraisal rules,” said Lawrence Yun, NAR chief economist. “No doubt many first-time buyers are rushing to beat the deadline for the $8,000 tax credit, which expires at the end of next month.”

The index gains were strongest in the West, with pending contracts up 22.3% compared to August 2008, followed by the Northeast (12.0%), the South (8.2%) and the Midwest (7.6%)

“There is likely to be some double counting over a span of several months because some buyers whose contracts were cancelled have found another home and signed a new contract to buy,” said Yun. “Perhaps the real question is how many transactions are being delayed in the pipeline, and how many are being cancelled? Without historic precedents, it’s challenging to assess.”

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