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The index of pending home sales, an indicator measuring the number of contracts signed in August, showed surprising strength, according to the National Association of Realtors.
The index rose 7.4 percent to 93.4 from an upwardly revised reading of 87.0 in July, and is 8.8 percent higher than August 2007 when it stood at 85.8. The index is at the highest level since June 2007 when it stood at 101.4.
“What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island and the Washington, D.C., region,” said Lawrence Yun, NAR chief economist.
The index in the West surged 18.4 percent to 109.5 in August and remains 37.8 percent above a year ago.
In the Northeast the index jumped 8.4 percent to 79.8 and is 2.0 percent higher than August 2007.
The index in the Midwest rose 3.6 percent to 84.5 in August and is 6.6 percent above a year ago.
In the South, the index increased 2.3 percent to 96.0 but is 2.1 percent below August 2007.
Yun notes the unusual timing of contract activity in August. “Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie,” he said. “August shows some unleashing of pent-up demand before the credit crisis accelerated in September.”
He cautioned that the sampling size for pending home sales is smaller than the track on existing-home sales, so there is more volatility in the forward-looking series. “We need to see just how much of this gain holds up,” Yun added.