Pending Home Sales INCREASE!

What to make of the increase in home sales?

Obviously, buyers…specifically lower end buyers…are buying. What are the buying? REOs and Short Sales. In other words, they are buying the homes they see and being the best overall values.

Will this trend continue? What do you think…read this article from Money.CNN.com and share your comments…

Is the housing meltdown ending?

Pending home sales rose in March for the second consecutive month and are up year over year. The Pending Home Sales Index from the National Association of Realtors showed a 3.2% gain to 84.6 from February, when it was 82. The index stands 1.6% higher than a year ago.

The consensus forecast of industry experts polled by Briefing.com had predicted no increase in the index.

It may still take a while before the market gains enough momentum to firmly state that the downturn has been reversed, according to Lawrence Yun, NAR’s chief economist. And, the upturn may have been boosted by the first-time homebuyers tax credit, a temporary measure that will lapse in December.

“We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around,” said Yun. “This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a down payment.”

The index is understood to be a forward indicator of home sales trends since it measures contracts signed, not completed sales. The up-tick may indicate that home prices have fallen low enough for buyers to get off the fence.

Feeling for the bottom

Yun is not calling a bottom yet, however, because the index is still at a relatively low level. Instead, he’s looking toward the summer selling season to determine what direction the market will take. Plus, he would like the number of homes on the market to drop to a more normal level of six to seven months of supply.

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“If inventory goes down – it’s at just under 10 months now – to below eight months, that would mean we’re on the way to a sustainable recovery,” Yun said.

Anecdotal evidence indicates that trend may be happening. Realtors and other industry insiders are seeing rising open house attendance and multiple bids on some particularly desirable properties. Plus, pricing has become sharper, according to Sherry Chris, the CEO of Better Homes and Gardens Real Estate.

“Overpricing seems to be ending,” she said. “Properties are coming onto the market and selling quickly.”

And buyers are feeling a little more urgency, she added. In many markets, buyers have not felt any pressure to make an offer. “They said to themselves, ‘I don’t have to act immediately. It will still be on the market two weeks from now,’” she said.

Today, buyers are more likely to bid because they perceive the market as at or near its bottom. An April Gallup Poll reported that 71% of Americans thought it was a good time to buy a house.

They don’t, however, believe there will be price increases soon; three of four buyers think prices will stabilize or even decline in their areas over the next 12 months, according to Gallup.

Pat Newport, a real estate analyst for IHS Global Insight, is putting less emphasis on pending home sales than he once did for his housing market analyses. There has been a disconnect lately, he said, between the number of properties going into contract (pending home sales) and the number that actually close (existing home sales).

He speculates that this is because buyers are making offers and signing contracts but, because of financing problems, many deals are falling through.

Regional differences

The South saw the largest gain of any region, with pending home sales jumping 8.5%. Pending sales are 7.7% higher there compared with a year ago.

The Midwest gained 3.9% from February and 1.7% year-over-year. Northeast sales fell 5.7% and are off 24.1% compared with March 2008. The West dropped 1% for the month but are up 8.2% year-over-year.

Low home prices continued to help to drive sales, although NAR’s affordability index actually fell 2.3% from February, when it hit a historic high. This index is based on family income, home prices and mortgage rates.

“Compared to a year ago, the typical family can pay much less in mortgage costs for the same home, or buy a better home without necessarily increasing their monthly payment,” said NAR President Charles McMillan, in a prepared statement. “For buyers who’ve been on the sidelines and have good jobs, the market has never looked more favorable.

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INCREASE in REOs (and BPO Assignments)

Sales of existing homes fell in March, according to an industry report released Thursday, but analysts say the housing market is showing signs of stabilization.

The National Association of Realtors said that existing home sales fell last month to a seasonally adjusted annual rate of 4.57 million units, 3% lower than the downwardly revised rate of 4.71 million in February.

March sales were down 7.1% year over year, and came in weaker than the 4.65 million rate forecast by analysts surveyed by Briefing.com.

Despite last month’s decline, existing home sales appear to be stabilizing, according to Ian Shepherdson, economist at High Frequency Economics.

“Sales are volatile month-to-month, but the trend appears to be flattening off,” Shepherdson said in a research note.

Single family home sales, which are considered the core of the market, fell at a 10% annualized rate in the first quarter of 2009, after a 17.4% drop in the last three months of 2008. At the current sales pace, existing-home sales will be down “only” 2% in the second quarter, according to Shepherdson.

First-time buyers made up 53% of existing home sales in March. Charles McMillan, NAR’s president, said first-time buyers are “crucial” to a recovery in the overall housing market.

“The housing market always heals from the bottom up, and with large numbers of first-time buyers entering the market it will become a little easier for sellers to trade up or down,” McMillan said in a statement.

Meanwhile, sales of “distressed properties” accounted for over half of all transactions in March. Foreclosed homes typically sell for 20% less than traditional homes, according to NAR.

“Clearly foreclosure activity is driving the marketplace,” said Adam York, an economist at Wachovia Economics Group, in a research report. “Buyers are clearly looking for ‘bargains,’ if they are looking at all.”

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Existing home sales in the West declined 4.2% in March. Sales in the South and the Northeast also fell, while sales in the Midwest were unchanged.

The national median existing-home price was $175,200 in March, up 4.2% from $168,200 in February. Still, the median existing-home price was down more than 12% since March 2008, when it was $200,100.

The total number of existing homes on the market at the end of March fell 1.6% to 3.74 million units. At the current sales pace, it would take an estimated 9.8 months to sell that inventory of properties. That’s up slightly from 9.7 months in February and January.

“The inventory overhang has stabilized too,” Shepherdson said. But the number of existing homes on the market remains historically high, and prices will continue to fall rapidly “for the foreseeable future,” he said.

Source: money.cnn.com

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