Pending Home Sale Index Rises; Florida Mortgage Demand Returns

Pending home sales, a market indicator, made a surprisingly strong gain in July, suggesting that the housing slump might be moderating.

The National Association of Realtors’ Pending Home Sales Index, based on national and Florida mortgage contracts signed in August, rose 4.3% (to a level of 110.1) from a reading of 105.6 in July. However, this is still 14.1% lower than August 2005.

A sale is listed as pending when the contract has been signed and the transaction has not closed. The sale usually is finalized within a month or two of signing the Florida home loan documents and all sides agreeing on terms.

“It’s certainly positive news but it’s coming off a large decline in July,” said Lawrence Yun, a senior economist at the association. “It implies there may be a few more months of weak housing figures, but perhaps this is the first sign of some stabilization.”

More Florida mortgage applications to come

This would all equtate to fewer declines in sales as there have been over the last few months. The index is a leading indicator for the housing sector, based on pending sales of existing homes., leading to confidence that more buyers are ready to hit the market.

“I think things are beginning to stabilize or level off,” said Jim Link, the association’s executive vice president.

Sales are not expected to increase anytime soon, but they won’t continue falling off a cliff, either, he said.

Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge, also noted that interest rates have been coming down a bit, which could account for the uptick in pending sales. The lower the Florida mortgage rates, the more likely people will apply for a loan.

“That could have enticed some people back into the market,” he said.