Pending home sales rise

WASHINGTON – Sept. 2, 2010 – Following a sharp drop in the months immediately after expiration of the homebuyer tax credit, pending home sales have modestly risen, according to the National Association of Realtors® (NAR).

The Pending Home Sales Index (PHSI), a forward-looking indicator, rose 5.2 percent to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June; it’s 19.1 percent below July 2009 when it was 98.1. Pending sales data reflects contracts and not closings, which normally occur with a lag time of one or two months.

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Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” says Lawrence Yun, NAR chief economist. “But the recovery looks to be a long process. Homebuyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.”

On the other hand, homes have not been this affordable in recent memory. “Affordability could reach a generational high in the second half of this year because of rock-bottom mortgage interest rates, helped partly by the Fed’s very accommodative monetary policy,” says Yun. “The loan underwriting standards are tighter, but homebuyers can improve their chances of getting a loan by staying well within their budget.”

The PHSI in the Northeast rose 6.3 percent to 62.5 in July and is 21.1 percent below a year ago.

In the Midwest the index increased 4.1 percent to 66.7 and is 25.7 percent below July 2009.

Pending home sales in the South rose 1.2 percent to an index of 86.3, and are 15.6 percent lower than a year ago.

In the West, the index jumped 11.6 percent to 95.0 and is 17.6 percent below July 2009.

The national index had fallen 29.9 percent in May and another 2.8 percent in June.

© 2010 Florida Realtors®

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