Pending Home sales drop

Following a surge driven by the home buyer tax credit, pending home sales fell with the expiration of the deadline for qualified buyers to sign a purchase contract, according to the National Association of Realtors.

The Pending Home Sales Index, a forward-looking indicator, dropped 30% to 77.6 based on contracts signed in May 2010 from a reading of 110.9 in April, and is 15.9% below May 2009 when it was 92.3. The falloff comes on the heels of three strong monthly gains as home buyers rushed to take advantage of the tax credit.

The data reflects contracts and not closings, which normally occur with a lag time of one or two months. However, many closings have been delayed recently from a rush of buyers into the system and slow processing of short sales, in addition to the heavy volume and a more thorough loan underwriting process. As many as 180,000 buyers who signed contracts by April 30 may have missed the June 30 closing deadline for the tax credit. However, Congress passed legislation recently to extend the deadline for delayed contracts and President Obama is expected to sign.

NAR chief economist Lawrence Yun said, “Consumers are rational and they rushed to meet the tax credit eligibility deadline in April. The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June,” he said. “Surprisingly, though, some local markets such as Portland, Maine and Jacksonville, Fla., actually experienced an increase in contract signings from a year ago without the tax credit. Existing-home sales that close in June will remain elevated, but we’ll then see a notable decline for July and August.”

Congress also reauthorized the National Flood Insurance Program. Many lenders were hesitant to approve mortgages on homes needing flood insurance without congressional action and numerous sales have been on hold. The action is retroactive to a temporary authorization that expired May 31, and also is expected to be signed by the president.

Yun noted the tax credit has broadly stabilized home prices. “Without the tax credit, there will be more aggressive price negotiations between buyers and sellers. The key test on whether the housing market can stand on its own without stimulus medicine will depend critically on private sector job creation in the second half of the year. We’ll also keep a close eye on market conditions on the Gulf Coast.”

Through May of this year, 495,000 net private sector jobs have been created; NAR’s forecast for employment growth is about 1 million additional net new jobs over the balance of the year and another 2 million in 2011.

“If jobs come back as expected, the pace of home sales should pick up later this year and reach a sustainable level of activity given very favorable affordability conditions,” Yun said.

“In most areas of the country, there will be no sharp snap back in home prices in the upcoming years, although some local markets have experienced double-digit gains this year,” Yun said. NAR forecasts the national median home price to rise only 4% cumulatively over the next two years.

“One factor that could lead to price acceleration in upcoming years for some markets is if the very low levels of new home construction were to persist for another year or two,” he added.

The PHSI in the Northeast fell 31.6% to 67.0 in May and is 14.8% lower than May 2009. In the Midwest the index dropped 32.1% to 70.8 and is 20.2% below a year ago. Pending home sales in the South fell 33.3% to an index of 82.5, and are 14.4% lower than May 2009. In the West the index declined 20.9% to 85.3 and is 15.1% below a year ago.

For more information, visit www.realtor.org.

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About Aragone & Associates Realtors

President & CEO of Aragone & Associates Realtors at First Team. Director of the Trust & Probate division with years of experience in Real Estate Disposition. Mrs Aragone has represented many clients in the disposition of numerous of their assets. For over 13 years they have been privileged to be a part of many real estate success stories throughout Orange County – through increasing profits by obtaining higher sales prices, shorter marketing time, lower costs and added value with repairs and upgrades. Today they are recognized in the business community for their unique and innovative method of delivering professional real estate services to their clients. A method that goes beyond the traditional services that Realtors perform to one that is truly comprehensive; and that focuses on their clients needs as well as their personal and financial goals, all while providing value-driven advice as opposed to just selling a property. Paula Aragone and her Team have become Trusted Advisors to their clients and get to collaborate with many trust and estate attorneys, family law attorneys, financial advisors, Professional Fiduciaries, Executors, Successor Trustee as well as corporate trustees in the disposition of the real estate assets. Aragone & Assoc. has a Full-Time support staff including: Full-time Property Manager and Property Preservation Staff, Full-Time BPO/ Listing coordinator Department, Full-Time Account Receivable/Payable/Reimbusement Specialist, 1 Part-Time Administrative support team member, Full-Time Showing Agent.
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