Pending home sales in the United States rose significantly in May indicating increased activity in the housing sector, according to the National Association of Realtors.
Data show the change in sales increased by 8.2 percent in May which is 13.4 percent higher than reading in May 2010. Last month figures were dismal as the number of pending homes fell by 11.6%. This double-digit drop was a huge surprise and showed that the housing sector was still struggling. It could still be and next month’s data could give a clearer picture. Last week U.S. Fed Chairman Ben Bernanke said that the housing sector is still under pressure, especially with the number of foreclosures going up.
The Pending Home Sales Index jumped to 88.8 in May from an upwardly revised 82.1 in April. The Index is a forward looking indicator based on contract signings and does not represent closings. There is usually a time lag of one or two months from signing to owning the home.
The PHS index is based on a large sample of homes in the country, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. Therefore it is usually a good indication of home sales and overall activity of the housing industry.
Usually a big change in the index moves the markets. However, the U.S. Dollar did not change much following release of the news, as this news was overshadowed by the Greek austerity vote news which today is more important than any other fundamentals.