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Pending home sales increased for the ninth consecutive month in October, according to a report released by the National Association of Realtors on Tuesday, with pending home sales rising to their highest level in well over three years.
NAR said its pending home sales index rose 3.7 percent to 114.1 in October from 110.0 in September, rising to its highest level since March of 2006. The continued increase came as a surprise to economists, who had expected pending home sales to edge down by 1.0 percent.
Lawrence Yun, NAR chief economist, said, "Based on the demographics of our growing population, existing-home sales should be in the range of 5.5 million to 6.0 million annually, but we were well below the 5-million mark before the home buyer tax credit stimulus,"
"This means the tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future," he added.
The continued increase in pending home sales was partly due to a 19.9 percent increase in pending home sales in the Northeast as well as a 11.6 percent increase in pending home sales in the Midwest.
While pending home sales in the South also increased by 5.4 percent, pending home sales in the West fell by 11.2 percent.
Looking ahead, Yun said that home sales could dip in the months ahead, noting, "The expanded tax credit has only been available for the past three weeks, but the time between when buyers start looking at homes until they close on a sale can take anywhere from three to five months."
"Given the lag time, we could see a temporary decline in closed existing-home sales from December until early spring when we get another surge, but the weak job market remains a major concern and could slow the recovery process," he added.
Last Monday, the NAR released a separate report showing that existing home sales increased by much more than expected in the month of October, with the sales growth driven by the first-time homebuyer tax credit.
The report showed that existing home sales jumped 10.1 percent to an annual rate of 6.10 million units in October from a downwardly revised 5.54 million in September. Economists had expected sales to rise to 5.70 million from the 5.57 million originally reported for the previous month.
At the time, Yun said, "Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November."
"With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer," he added.
While the first-time homebuyer tax credit had been due to expire at the end of November, President Barack Obama signed a bill early last month that extended and expanded the tax credit.
The bill extends the $8,000 first-time homebuyer tax credit through April 30, 2010 and expands it to include a $6,500 credit for people who have lived in their current homes for at least five years.
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