Need To Know News

The Pending Home Sales Index fell 4.6% to 89.2 in September following an upwardly revised 93.5 reading in August. The market for pending home sales softened considerably in September following an impressive rebound in August. The September drop was due to tighter credit conditions and deteriorating economic conditions, according to the NAR. The September Pending Home Sales Index has gained 1.6% compared to September of last year, though forward looking prospects appear bleak, especially in the near-term.

NAR chief economist Lawrence Yun describes the September drop as “understandable”, and says the index remains in a “broad period of stabilization”. Yun says the US economy is in recession and says its depth could depend entirely on housing. In Yun’s view, a”sufficient housing stimulus” would limit the depth of the US recession.

NAR president Richard Gaylord says the market for pending home sales remains tough for both buyers and sellers and that any pickup in activity will depend on “correct pricing and professional expertise” in addition to affordable financing.

The August Pending Home Sales Index rose 7.4% to 93.4, much better than the 1.3% drop expected, following an upwardly revised 87 in July.

The Pending Home Sales Index was up 8.8% compared to August ‘07, and is at its highest level since June ‘07 when its stood at 101.4.

NAR chief economist Lawrence Yun attributes the unexpected spike in the Index to “more people taking advantage of lower prices.”

Yun says he’s unsure how the recent credit market meltdown will impact pending home sale contracts; though it is highly unlikely to have had a positive impact which will limit their transference into existing home sales.

Yun points out that the jump in the index is somewhat unusual but may reflect pent-up demand since the onset of the credit crunch. The rise may also be attributed to less-stringent lending criteria following the GSE bailout.

The July Pending Home Sales Index fell 3.2 percent to 86.5 from an upwardly revised reading of 89.4 in June which represented at 5.8% increase from May. The July index is down 6.8 percent below July 2007 when it stood at 92.8.
Lawrence Yun, NAR chief economist, notes the “overly stringent lending criteria imposed by Fannie Mae and Freddie Mac in the past month” as damped contract signings. Yun says that the recent pull back in Pending Home Sales does not change the fact that the index has been “fairly stable on a national basis for nearly a year”. Apparently anecdotally, Yun claims “contract signings have been steaming ahead , nearly doubling in activity from a year before in several California and Florida markets” and says the outer Washington, D.C., exurbs also are coming around very strongly. The Northeast region retreated following a robust gain in the previous month, and soft activity was observed in the broad midsection of America despite very affordable conditions.”

The July US Pending Home Sales Index is expected to fall 1.5% to an index reading of 88.7 following an index reading of 89 in June.

Higher foreclosure rates are likely to result in a further increase in unsold home inventories, which will put more downward pressure on prices. Also, the 30yr fixed rate mortgage averaged 6.29% over the period from a 5.8% average over the first half of the year. Higher mortgage rates and continued credit market tightness are not likely to have prompted an increase in buying over the period.

The June Pending Home Sales Index was up 5.3% to 89 from a downwardly revised May reading of 84.5. On a y-o-y basis, the Index is down 12.3%, an improvement over last month’s -15.4% y-o-y reading.

NAR Chief Economist Yun believes the “vacilllation of data from one month to the next indicates a housing market in transistion” and notes that all 4 regions made gains in June. Yun believes the temporary tax credit for first-time buyers — he numbers them 2.5mln — will push Existing Home Sales up 7% in 2009 to 5.51mln from an expected 5.15mln this year. Existing Home Sales are currently running under 5mln per month since February, so NAR is expecting a substantial jump in sales.

NAR notes that rising commodities prices and higher construction costs have made existing homes a more attractive alternative. NAR expects home prices to rise 3 to 6% in 2009. That said, they expect New Home Sales to bottom out in Q2 2009 and urge builders to cut production further to cut down on inventories.

The June Pending Home Sales Index is expected to fall 1% after dropping 4.7% in May and jumping 7.1% in April (a blip attributed to an early Easter that allowed for more April sales).

Last month, the National Association of Realtors didn’t deviate from its hammered-home theory suggesting timid US homebuyers are sitting on the sidelines, waiting for prices to come down and credit tightness to slacken.

The NAR predicts that pent-up demand will rush in at some point, putting a floor under housing market weakness and driving recovery. While this may be true, there is over a year’s supply of homes on the market — a lot of inventory to work through. Tomorrow, the NAR is almost certain to minimize that aspect while highlighting the recently enacted housing relief bill, which gives first-time homebuyers a $7,500 interest-free loan and permanently increases key loan limits.

On prices, the NAR predicted last month that the aggregate median cost of an existing home will fall 6.2% this year to $205,300, before a 4.3% rise next year. The median new home price is expected to fall 3.2% to $239,330 this year before gaining 5.3% next year.

If the credit squeeze does indeed loosen and prices fall, the NAR mayget its wish — but don’t hold your breath just yet. The bottom isn’t here yet, and tomorrow’s index should be more of the bad news we’ve come to expect from US housing market.

(Pending Home Sales are counted when the home contract has been signed, but before the transaction closes. Pending sales typically are finalized within a month or two of signing.)

The June Pending Home Sales Index is expected to fall 1% after dropping 4.7% in May and jumping 7.1% in April (a blip attributed to an early Easter that allowed for more April sales).

Last month, the National Association of Realtors didn’t deviate from its hammered-home theory suggesting timid US homebuyers are sitting on the sidelines, waiting for prices to come down and credit tightness to slacken.

The NAR predicts that pent-up demand will rush in at some point, putting a floor under housing market weakness and driving recovery. While this may be true, there is over a year’s supply of homes on the market — a lot of inventory to work through. Tomorrow, the NAR is almost certain to minimize that aspect while highlighting the recently enacted housing relief bill, which gives first-time homebuyers a $7,500 interest-free loan and permanently increases key loan limits.

On prices, the NAR predicted last month that the aggregate median cost of an existing home will fall 6.2% this year to $205,300, before a 4.3% rise next year. The median new home price is expected to fall 3.2% to $239,330 this year before gaining 5.3% next year.

If the credit squeeze does indeed loosen and prices fall, the NAR mayget its wish — but don’t hold your breath just yet. The bottom isn’t here yet, and tomorrow’s index should be more of the bad news we’ve come to expect from US housing market.

(Pending Home Sales are counted when the home contract has been signed, but before the transaction closes. Pending sales typically are finalized within a month or two of signing.)