Over the last few months, I’ve been talking about the imminence of housing
growth to a mostly unreceptive audience. Last week, though, one particular
data-point reached the wire that is definitely supportive of my argument. The
Pending Home Sales Index, which measures contract signings and is therefore an
early indicator of activity, marked a level significantly above the prior year
result. That year-to-year comparison is what we’ve been looking for in order to
mark the bottom on housing. However, we also received news last week indicating
that home prices may have reached bottom
this spring as well. It may yet be too early for some to accept the housing turn
around, but I’ll go ahead and declare it anyway.

The Pending Home Sales Index rose 8.2% above its April mark, to
88.8 in May. But April was hampered by weather and had fallen sharply off from
March. Therefore, it was not surprising to see significant sequential month
growth in May. What impressed industry watchers, but not my well-informed
readers, was that May’s index was 13.4% higher than May of 2010. That
year-to-year difference was remarkable, and you could have bet we would remark
about it here considering the beating
we’ve been taking on our positive real estate market view of late.

May’s positive year-to-year change marked the first such result since April
of 2010, when activity benefited greatly from the government tax break for first
time buyers. This time around, given no such synthetic catalyst, we’ve got
something truly impressive, perhaps even the start of true growth. However, it
is notable that last year’s period suffered a bit due to the pull forward effect
of that same tax break.

May, June and maybe even July’s Pending Home Sales Indices were likely
affected as prospective first-time buyers and some others that had been given
incentive to enter the market pushed forward their actions a month or more to
take advantage of the $8K tax break. Also, housing naysayers would be right to
remind us that absolute levels of activity remain extremely low despite the
improvement. Yet, we cannot deny that growth is occurring now, and across the
nation as well.

The Northeast reported a 4.4% year-over-year improvement in its regional
index. The Midwest saw a 17.2% improvement against the prior year. The South was
14.6% higher than a year ago, and the West reported a 13.5% better figure this
year. That’s widespread. Markets like Houston, Hartford CT, Minneapolis, Seattle and Indianapolis saw contract
signings roughly 30% higher than a year ago.

Contract signings precede closings by 30 to 60 days, so we should soon see at
least existing home sales pick up steam in the months ahead. New home sales
could of course take a bit more time, especially given the number of distressed
properties still remaining on the market. However, the real estate pricing data
reported last week by Standard & Poor’s Case Shiller, and the week before by
the FHFA, seem to show that the trend should now be for inventory drawdown,
stabilizing to rising pricing and modest home sales growth.