Pending home sales rose for the third month in a row in April, boosted by low interest rates, affordable home prices, and the $8000 first-time homebuyer’s credit.
According to a report released today by the National Association of Realtors, the Pending Homes Sales Index rose 6.7% to 90.3 from 84.6 in March. The index is 3.2% higher than it was a year ago when it was 87.5.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.
Lawrence Yun, NAR chief economist, said that buyers are responding to very favorable market conditions. “Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market,” he said. “Since first-time buyers must finalize their purchase by November 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers.”
Regionally, the Pending Home Sales Index in the Northeast shot up 32.6% to 78.9 in April, and is .8% above April 2008. The index in the Midwest increased 9.8% to 90.4 and is 11.1% above a year ago. The index in the South dipped .2% to 93.0 in April, but is 3.5% higher than it was a year ago. In the West, the index rose 1.8% to 94.8 but is 2.9% below April 2008.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said there are numerous buyer assistance programs around the country. “Some states are offering bridge loans that allow first-time buyers to use the tax credit for down payment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location,” he said.
McMillan said that HUD announced that qualifying buyers can use the tax credit towards closing costs on FHA loans, to buy down the interest rate, or to make a larger down payment, and that interest buyers should contact a Realtor® to learn about the options in their area.
NAR said the Housing Affordability Index is in record territory. The index rose to 174.8 in April from an upwardly revised 171.9 in March, the second highest reading on record since its peak at 176.9 in January of this year. The index at a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced existing single-family home, with a 20% down payment and assuming 25% of income goes to mortgage principal and interest.. Tracking began in 1970.
For example, a median-income family that earns $60,900 could afford a home that costs $296,800 in April. For first-time buyers with the same income but smaller down payments, the affordable price is roughly 80% of that amount. The affordable price for the median income family was well above the median home price for April at $169,800
Yun caution that the reporting sample for pending home sales is smaller than that of existing home sales, so it is subject to greater variability. “In addition, the relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons,” he said. “Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval, and some sales are falling through at the last moment.”
The total number of existing-home sales is expected to improve but with dramatic local market variation in the timing of recovery. “The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline,” Yun said.
Source:
National Association of Realtors
