April 27, 2012 (Chris Moore)

Contract signings for home purchases improved in March, rising 4.1 percent to 101.4 from 97.4 in February according to the National Association of Realtors® (NAR) Pending Home Sales Index (PHSI).

The boost in contract signings puts the Index 12.8 percent above March of last year when it was 89.9.

Lawrence Yun, chief economist of NAR, stated, “First quarter sales closings were the highest first quarter sales in five years. The latest contract signing activity suggests the second quarter will be equally good. The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses.”

But cancelled purchase contracts continue to be a challenge for real estate agents as nearly one in three NAR members has reported at least one contract cancellation since October of last year.

Most contract failures are caused by declined mortgage applications or low appraisals but can also be caused by home inspection problems and employment losses. Some sales are still completed after the contract delay; while others will go on to make another offer.

Two of the four regions in the Index experienced declines in their monthly level of sales contract activity while all of the regions posted higher levels of activity than the previous year.

In the Midwest, the monthly Index fell by 0.9 percent to 93.3, followed by the Northeast, which saw activity decline by 0.8 percent to 78.2. In the West, the Index increased 8.7 percent to 108.0, while in the South, the Index improved by 5.9 percent to 114.1.

Compared to March 2011, the Northeast was 21.1 percent higher, the Midwest improved 16.9 percent and the South and the West saw activity improve by 10.6 and 8.7 percent, respectively.

The PHSI is a forward looking indicator which generally indicates closings one to two months in the future.

Tags: pending home sales, existing home sales, contract signings, contract cancellations