Pending home sales smashed through expectations Thursday, reaching their highest level in 19 months, according to the National Association of Realtors. The strong rebound could signal coming strength in existing home sales, which reflect completed sales and tend to lag pending sales by a month or two.
A forward-looking indicator, the Pending Home Sales Index, which reflects when someone signs a contract to buy a home, surged more than 7 percent in November and is up almost 6 percent over last year's numbers. The last time the index reached these levels was in April 2010 as buyers rushed to take advantage of the home-buyer tax credit.
"November is doing reasonably well in comparison with the past year," said Lawrence Yun, NAR's chief economist, in a release. "The sustained rise in contract activity suggests that closed existing-home sales, which are the important final economic impact figures, should continue to improve in the months ahead."
Still, contract failures continue to poke a hole in the inflating optimism for home sales in the coming year. Some of the uptick in pending home sales seems to be the result of buyers recommitting to a purchase after contracts fell through the first time, primarily due to problems getting a mortgage.
Experts expect mortgage rates to remain low in coming months, which should help spur more housing demand if tight lending standards doesn't stifle it first.