Pending Home Sales Up Again

By:: Kara Johnson | May 04, 2010

Pending home sales rose in March, as the spring homebuying season got underway and buyers sought to take advantage of a soon-to-expire tax credit.

Figures released today by the National Association of Realtors (NAR) show that pending home sales posted a 5.3 percent increase in March, coming on the heels of an 8.2 percent increase in February. Overall, pending sales were up 21.1 percent from their March 2009 level. All figures are seasonally adjusted.

Lawrence Yun, NAR’s chief economist, said the market was showing the effects of the federal homebuyer tax credit, but that lower sales are expected in the months after the credit expires. Homebuyers needed to have their purchase offer accepted by April 30 in order to qualify for the credit.

However, Yun predicted that sales should pick up again in the second half of the year if the economic recovery remains on track and home prices stabilize. Despite the end of the federal tax credit, Yun said the housing market is beginning to see a positive effect from an increased availability of jumbo mortgages and loans for second homes, a sign that lending in nongovernment-backed loans is beginning to open up.

The monthly gain in pending sale was primarily driven by a strong increase in sales activity in the South, where sales were up 12.7 percent over the month before, following another strong increase in February. Sales in the Midwest and West were up a more modest 1.2 percent and 1.9 percent, respectively, while pending sales in the Northeast actually declined 3.3 percent.

On an annual basis, all four regions posted significant increases over their March 2009 figures, led by the South and Northeast, with gains of 28.3 percent and 27.2 percent, respectively. The Midwest showed an annual gain of 18.5 percent, while the West, which contains some of the hardest-hit markets affected by the downturn and foreclosure crisis, posted only an 8.8 percent annual increase.

Pending sales reflect home purchases where a sales contract has been signed, but financing may not yet be arranged and the transaction has yet to be completed. According to the NAR, pending sales figures typically precede actual sales by about two months.

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