Pending Home Sales Up for Third Straight Month

By:
Kara Johnson | June 02, 2010
Signed contracts for home sales rose 6.0 percent in April, as homebuyers sought to take advantage of expiring tax credits before an April 30 deadline, according to figures released today by the National Association of Realtors (NAR).
 
It was the third consecutive monthly increase reported by the NAR, and slightly stronger than analysts had expected. It follows increases of 7.1 percent in March and 8.3 percent in February.
 
April pending home sales were at their highest level since October 2009, which preceded the initial deadline for the homebuyer tax credit. The $8,000 tax credit for first-time buyers was originally scheduled to expire at the end of November, before Congress extended it and added a $6,500 credit for repeat buyers.
 
“There were concerns that only a small pool of buyers were left to take advantage of the tax credit extension,” said Edward Yun, NAR chief economist. “But evidently the tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to surging sales.”
 
Most observers expect that home sales will decline after April, following the end of the homebuyer tax credit program. However, Yun said the housing market appears to be on solid footing, provided the economy continues to add jobs.

“The home buyer tax credit brought close to 1 million additional buyers into the market, which is now helping the trade-up market and has significantly improved the inventory situation,” Yun said. “This stabilized home prices more quickly and has preserved about $900 billion in home equity; in turn, that is keeping additional households from going underwater and risking foreclosure.”
 
One point of concern Yun cited is that homebuyers who signed sales agreements in April must close those sales by June 30 in order to qualify for the tax credit. Normally, he said, two months would be enough time to close a sale, but some buyers may experience delays due to appraisal issues or in trying to get banks to approve short sales, which often takes more than two months.
 
The NAR Pending Home Sales Index stood at 110.9 in April, just below the 112.4 mark of last October., on a scale where a score of 100 represents sales activity in the year 2000. On an annual basis, April pending sales were up 22.4 percent from April 2009.
 
On a regional basis, the Northeast showed the strongest monthly increase, with pending sales up 29.5 percent from March, and 24.5 percent from one year ago. The South showed the only monthly decline among the four major regions, down 0.6 percent, but still had the largest annual sales gain of 31.3 percent.
 
Pending sales in the Western region were up 7.5 percent for the month and 12.0 percent from last year, while the Midwest showed a 4.1 percent monthly gain and a 17.9 percent annual increase.

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