Pending Home Sales Fall in 2006; Lofty Expectations for 2007

Here’s the bad news from last year: An index that measures pending home sales dropped 10.1 percent in 2006 compared to 2005, according to preliminary data released today by the National Association of Realtors.

But here’s the good news for this year: A real estate experts predicts a big comeback for the national and Florida housing market. We’ll get to that shortly.
The Pending Home Sales Index, based on contracts signed in 2006, reached 111.8 in 2006 compared with 124.4 in 2005. A sale is listed as pending when the Florida mortgage contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing.

Regionally, the index dropped 14.8 percent in the West, 13 percent in the Midwest, 9.3 percent in the Northeast and 6 percent in the South in 2006 compared to 2005.

“A steady narrowing from year-ago readings has been observed since last July when the level of unsold housing inventory peaked at an all-time high,” according to the report.

The index is based on a large national sample - typically representing about 20 percent of transactions for existing-home sales. The Realtor group demonstrated that the level of monthly sales-contract activity from 2001-04 parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined and the first of five consecutive record years for existing-home sales.

David Lereah, chief economist for the association, said in a statement: “I expect modest sales gains throughout the year, with what I believe are sustainable levels of activity. 2007 promises to be the fourth-best year on record.”

In other words: breathe easy, seller. Florida mortgage loan activity will pick up again in the near future.