(RTTNews) - Pending home sales in the U.S. rose for the fifth time in the past six months in December, according to a report released by the National Association of Realtors on Thursday, with the increase attributed to good affordability conditions and economic improvement. NAR said its pending home sales index rose by 2.0 percent in December following a downwardly revised 3.1 percent increase in November. With the monthly increase, the index rose to its highest level since April of 2010, which was the last month that the homebuyer tax credit was in effect.
Despite the monthly increase, however, the pending home sales index remains 4.2 percent below the reading seen in December of 2009.
A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
Lawrence Yun, NAR chief economist, said, "Modest gains in the labor market and the improving economy are creating a more favorable backdrop for buyers, allowing them to take advantage of excellent housing affordability conditions."
"Mortgage rates should rise only modestly in the months ahead, so we'll continue to see a favorable environment for buyers with good credit," he added.
The continued increase in pending home sales reflected notable sales growth in the South and the Midwest, where pending sales rose by 11.5 percent and 8.0 percent, respectively.
While pending home sales in the Northeast edged up by a more modest 1.8 percent, pending sales in the West fell by 13.2 percent.
Peter Boockvar, equity strategist at Miller Tabak, said, "The average 30 year mortgage rate in December was 4.93 percent vs. 4.44 percent in November so it's possible that the fence sitter effect kicked in as people came off it in order to lock in rates before they moved even higher."
"As we look to 2011, the housing industry will be free of the tax credit distortions that helped to temporarily boost demand last year and in 2009, but the offset is the U.S. economy is better off now than it was then with a labor market that continues to improve, albeit still slowly," he added.
The Commerce Department released a separate report on Wednesday showing a much bigger than expected increase in total new home sales in December, with a jump in new home sales in the Western region of the country contributing to the growth.
The report showed that new home sales jumped by 17.5 percent to an annual rate of 329,000 in December from the revised November rate of 280,000. Economists had expected new home sales to edge up to 300,000 from the 290,000 originally reported for the previous month.
