Increase in Pending Home Sales

Increase in Pending Home Sales

According to the latest statistics released by the National Association of Realtors, pending home sales increased in December 2008. More buyers and investors are buying because of the affordable prices and low interest rates. The biggest gains were in the South and Midwest. Some good news finally!

According the National Association of Realtor’s Pending Home Sales Index, based on contracts signed in December 2008, the index rose 6.3 percent to 87.7 from an upwardly revised 82.5 in November, and is 2.1 percent higher overall than in December 2007, where it was 85.9.

According to Lawrence Yun, the NAR chief economist, “The monthly gain in pending home sales, spurred by buyers responding to lower home prices and mortgage interest rates, more than offset an index decline in the previous month,”… “The biggest gains were in areas with the biggest improvements in affordability.”

The NAR’s Housing Affordability index also rose 10.9 percent in December to 158.8, which is the highest on record. The HAI index reflects the relationship between home prices, mortgage interest rates and family income and is the most favorable tracking since the index began in 1970.

Mr. Yun also said…“Significant uncertainty still clouds the housing market despite improved affordability conditions. For a sustainable housing market recovery and, hence, sustainable economic recovery, we need a significant housing stimulus and mortgage availability for qualified borrowers,”…

The index reflects that pending home sales in the Northeast fell 1.7 percent to 62.1 in December 2008 and is 14.5 percent below December 2007. In the Midwest the index jumped 12.8 percent to 83.7, but still remains 1.2 percent below December 2007. The index in the South was up 13.0 percent to 96.8 in December and is 1.6 percent above December 2007. For the West, the index fell 3.7 percent to 97.5, but still remains 17.5 percent higher than December 2007.

All in all the rise in homes under contract is a good sign, but the housing market is really fragile right now and the economy news keeps getting worse with job losses every day so time will tell if the President’s new stimulus plan will help the housing market. Additional measures need to be taken to eliminate some of the foreclosure inventory and stabilize home prices. Hopefully, the mortgage market conditions will improve soon with the government help so that there is an increase in credit forms available. Yun said …“the outlook for housing and the economy is murky. “Although Congress and the Obama administration are taking steps to help the economy, the stimulus package must deal with the root cause of the economic downturn, and apply the right fix to turn it around. If housing is ignored, a significant downward overshooting of home prices would continue to drag the economy down independent of the scale of the stimulus,” …

The Pending Home Sales Index is a leading market indicator of what is going on in the housing market for the next couple months because signed contracts are not finalized and closed typically for a month or two afterwards.

Existing-home sales for January 2009 will be released February 25, 2009 and the next Pending Home Sales Index will be on March 3, 2009.

by: Jiwan Ripley, Designated Broker Connect Realty Sandpoint