Pending Home Sales Jump

Pending home sales rose sharply in April, the third consecutive month of increases, according to a monthly report released today by the National Association of Realtors (NAR).

The NAR's Pending Homes Sales Index rose 6.7 percent in April, driven by a huge increase in home sales contracts in the Northeast, where pending sales jumped an astonishing 32.6 percent.

Nationally, the 6.7 percent increase was the largest in eight years and far exceeded analysts' predictions. Housing experts surveyed by the economic analysis company Briefing.com had predicted only a 0.5 percent increase.

Tax credit a factor

NAR officials said the numbers show that the new $8,000 tax credit for first-time homebuyers is beginning to affect the market, often in tandem with various buyer-assistance programs around the country.

"Some states are offering bridge loans that allow first-time buyers to use the tax credit for downpayment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location," said NAR President Charles McMillan, a real estate broker in the Dallas-Fort Worth area. "Just last week, HUD announced that qualifying buyers can use the tax credit for closing costs on FHA loans, to buy down the interest rate or make a larger down payment."

April's sales were also driven by historically low interest rates and unusually low housing prices, due in part to a glut of foreclosures hitting the market. It remains to be seen if the trend will continue; rising mortgage interest rates over the past two weeks may dampen May's figures, to be released in early July, and the twin bankruptcies of GM and Chrysler could put the brakes on any nascent housing recovery.

Exceeds April 2008 figures

April's increase means that the Pending Home Sales Index is one of the few economic indicators that has actually posted a gain over the past 12 months. The index now stands at 90.3, a 3.2 percent increase over the April 2008 figure of 87.5.

A factor in April's increase could be that sales are taking longer to close in the current economic environment. The index is based on signed sales contracts for homes that have not been closed on, a process that typically takes one to two months.

"The relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons," said Lawrence Yun, NAR chief economist. "Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval, and some sales are falling through at the last moment."

Northeast far ourstrips other regions

The 32.6 percent one-month increase in the Northeast far exceeded the other three regions of the country. Pending sales in the Midwest were up 9.8 percent, but rose only 1.8 percent in the West and declined 0.2 percent in the South.

The Pending Sales Index is considered a leading indicator because it is based on signed sales contracts for homes that have not been closed on. It tends to be more variable than the existing home sales index, in part because it is based on a smaller sample and in part due to factors