June 29, 2011 (Chris Moore)

The Pending Home Sales Index (PHSI) rebounded in May as contract signings increased 8.2 percent to 88.8 after falling 11.3 percent from an upwardly revised 82.1 in April according to the National Association of Realtors (NAR).

The PHSI is 13.4 percent higher than May of 2010 which is the first time in a year that contract activity was above year-ago levels. The year-over-year increase reflects the sudden drop in purchasing activity after the end of the first-time home buyer’s tax credits.

In April 2010, when home buyers were rushing to take advantage of the tax credits before they ended, the Index jumped to 111.5. But in the following month of May, home sales tumbled following the end of the stimulus and the Index plummeted to 78.3.

Lawrence Yun, chief economist for NAR, continued to cast part of the blame on overly strict underwriting standards by saying, “Home sales still could be 15 to 20 percent higher. If banks would simply return to normal sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector.”

Regionally, pending home sales in the Northeast rose 7.3 percent to 69.2 in May and is 4.4 percent above a year ago and in the Midwest sales jumped 10.5 percent to 82.8 and is 17.2 percent higher than May 2010.

In the South, pending home sales increased 4.1 percent to an index of 95.0 in May and are 14.6 percent higher than a year ago and in the West sales surged 12.9 percent to 100.6 and is 13.5 percent above May 2010.

Tags: pending home sales, NAR, contract signings, first-time home buyers, underwriting standards, tax credits