June 2, 2009
Amid all the gloomy statistics about foreclosures, there was a bright ray of sunshine Tuesday, as the National Association of Realtors reported pending home sales leaped 6.7 percent in April.
It was the largest one-month advance since the 9.2 percent gain in October 2001 and the number of pending sales exceeds April 2008 by 3.2 percent.
Pending home sales reflect the number of contracts signed in a given month, but the sales have not actually closed yet. As such, they are considered a leading indicator of the market moreso that sales that have already gone to closing.
"Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market," said Lawrence Yun, NAR's chief economist. "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."
The Pending Home Sales Index in the Northeast shot up 32.6 percent to 78.9 in April and is 0.8 percent above a year ago. In the Midwest the index rose 9.8 percent to 90.4 and is 11.1 percent above April 2008. The index in the South slipped 0.2 percent to 93.0 in April but is 3.5 percent higher than a year ago. In the West the index rose 1.8 percent to 94.8 but is 2.9 percent below April 2008.
Yun cautions 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. Yun said the market has already bottomed in some areas, but that in this unusual housing cycle, other areas will continue to decline.
