Pending U.S. home sales up three months in a rowJune 4, 2009
Submitted by David Boehmig, President/Founder
WASHINGTON (MarketWatch) — Pending sales of existing homes rose for the third month in a row in April, boosted by record-low mortgage rates and special incentives for first-time buyers, a real estate trade group reported Tuesday.
The pending home sales index for April rose 6.7% after a 3.2% increase in March, the National Association of Realtors said. The index, based on sales contracts on existing homes, was 3.2% above April 2008. “This is yet another positive indication that the bottoming process is forming” in home sales, wrote Jennifer Lee, an economist for BMO Capital Markets. “Now if only prices would stabilize.”
The NAR reports on sales of existing homes in a separate report once a transaction closes, usually six to eight weeks later. In April, existing-home sales rose 2.9% to a seasonally adjusted annual rate of 4.68 million, 3.5% below year-earlier sales rates.
With mortgage rates hovering near all-time lows, housing affordability has improved, said Lawrence Yun, chief economist for the NAR. Yun expects existing-home sales to rise about 17% by the end of the year to a seasonally adjusted annual rate of 5.48 million. Sales of new homes, by contrast, are expected to fall another 12% to a 308,000 annual rate.
“Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers,” Yun said.
The federal government is offering an $8,000 tax credit for first-time home buyers, which can be used for the down payment. Other incentives are being offered by state or local governments.
Recently, first-time buyers have accounted for about half of sales, a much larger percentage than in normal markets. With a large number of owners underwater in their mortgage, many are not able to sell their home in order to buy a different house. About half the sales have been foreclosures or short sales.
Pending home sales rose about 33% in the Northeast, and about 10% in the Midwest. Pending home sales were flat in the South and rose 2% in the West.
“Given that most of the gains in sales were in the more stable Northeast and Midwest markets, it appears that foreclosed properties were less of a factor given that most of the foreclosures have been occurring in the West and the South,” wrote Millan Mulrainem, an economist for TD Securities.
Yun noted that it’s taking longer to close a sale. Mortgage processing time has increased due to complexities in negotiating short sales and foreclosures. Some short sales are falling through at the last moment, he said.
Rex Nutting is Washington bureau chief of MarketWatch.
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