One of the biggest economic stories this summer has been the gradual improvement in the battered housing market. Wednesday’s data further reinforces that point.
U.S. pending home sales — which tracks the number of buyers who have signed contracts to purchase previously owned homes — jumped in July to the highest level since April 2010. And if you remember back that far, that’s when the government was juicing demand by offering federal tax credits to buyers.
But now, it appears that real demand is returning to the housing market.
Dan Greenhaus, chief global strategist at BTIG, notes if you strip out the pending home sales spike in 2010 caused by tax credits, then pending home sales are now at the highest level since mid 2007.
“This is just the latest in an ongoing story showing sustained gains in the housing market,” Greenhaus says.
Pending sales typically close within one or two months of signing. Economists say the pickup in pending sales could provide a boost to existing home sales in the next few months.
Mortgage rates, near record lows, are giving buyers even more purchasing power. Homebuilder sentiment has risen throughout the spring and summer months. And home prices continue to rise, with yesterday’s S&P Case-Shiller data showing prices in June notched their first-year-over-year increase since September 2010.
The naysayers say housing experienced similar seasonal upticks throughout the last few summers, only to struggle through the rest of those years. But this time around more economists are saying a housing rebound may be sustainable due to low inventories and strong demand.
“The current sales pace is sustainable and is likely to keep rising,” says Joe Naroff, president and chief economist at Naroff Economic Advisors.