Pending Sales Index Increases;
A Sign Housing Market Is Stabilizing
by Jeff Bater
From The Wall Street Journal Online
July 07, 2006
A gauge of future home sales turned upward, indicating that the housing market is stabilizing, and the country's job market showed healthy signs, according to economic data released yesterday.
The National Association of Realtors' index for pending sales of existing homes increased at a seasonally adjusted annual rate of 1.3% to 113.4 in May from April's 111.9. The latest index was 10.1% below the year-earlier level. While lower than a year ago, the reading's monthly gain suggests that the housing sector -- a key contributor to the economy -- is cooling gently.
"The slight change in pending home sales indicates the market is beginning to level out," said David Lereah, the NAR's chief economist. "This is consistent with our forecast, which is showing a soft landing for the housing sector."
By region, the index showed a 0.6% drop in the Northeast in May from April and a 7.8% decline since May 2005. In the West, the index increased 9.9% in May but was 12.9% below the prior year. The South fell 1.7% in May and was 7.3% below May 2005. The Midwest climbed 0.6% in May but was down 13.6% from a year earlier.
The NAR index of pending home sales is based on contracts signed in May for the sale of existing homes, including single-family units and condominiums. A home sale is pending when the contract has been signed but the transaction hasn't closed.
Separately, the job market also received some positive news. Initial jobless claims decreased by 2,000 to a seasonally adjusted 313,000 in the week ended July 1, the Labor Department said. New claims for the week ended June 24 were 315,000, revised from a previously reported 313,000. Wall Street expectations had projected jobless claims would rise.
The government will release its snapshot for June employment today.
Meanwhile, though, the service sector showed signs that it expanded at a slower pace last month. The Institute for Supply Management reported that its nonmanufacturing index fell to 57% in June from 60.1% in May. That is the lowest level since January. The ISM also reported that new orders declined in the service sector, suggesting a softer performance in the months ahead.
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