Contracts to buy homes hit 2-year high

The National Association of Realtors reported today that its Pending Home Sales Index, which tracks homes under contract but not yet sold, increased 2.4% from June to July — and 12.4% from July 2011.

The index's reading of 101.7 is the highest since April 2010, when a homebuyer tax credit spurred sales. By eclipsing the magic number of 100 — the NAR's baseline for contract activity — the index also has reached "healthy housing market" territory.

Bottom line: Real estate may be having a decent summer after all.

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Although Bloomberg economists had predicted just a 1% increase in July's pending home sales, today's positive news was somewhat expected. Sales activity increased across the board in July, with existing-home sales registering a 2.3% monthly gain and new-home sales reaching a volume unseen since April 2010.

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Homebuilder confidence, a similar gauge of the housing market's future, hit a five-year high this month. Permits to build new homes in July also reached their highest level since August 2008.

Monthly gains are common in the summer, the busy season for construction. But some analysts say this growth could last a little longer. “All the elements are in place for continued growth in the housing industry,” Omair Sharif, a U.S. economist at RBS Securities Inc., told Bloomberg.

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Pending home sales by region:

• Northeast: Up 0.5% from June and up 13.4% from July 2011
• Midwest: Up 3.4% from June and up 20.2% from July 2011
• South: Up 5.2% from June and up 15.6% from July 2011
• West: Down 1.7% from June but up 1.3% from July 2011

There's generally a lag of a month or two between contract signings and closings. Looking toward August's sale data: June's Pending Home Sales Index did register a monthly decline, though NAR chief economist Lawrence Yun cited low inventory as a primary factor.

— Tony Stasiek is a producer/editor at MSN Real Estate.