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real estate market on Sanibel & Captiva - updated regularly.
Pending home sales: Upward trend continues
WASHINGTON – Aug. 4, 2009 – Pending home sales are up for the fifth consecutive
month, the first time in six years for such a streak, according to the National
Association of Realtors® (NAR).
The Pending Home Sales Index, a forward-looking indicator based on contracts
signed in June, rose 3.6 percent to 94.6 from an upwardly revised reading of
91.3 in May; and it’s 6.7 percent above June 2008 when it was 88.7. The last
time there were five consecutive monthly gains was July 2003.
“Historically low mortgage interest rates, affordable home prices and large
selection are encouraging buyers who’ve been on the sidelines,” says Lawrence
Yun, NAR chief economist. “Activity has been consistently much stronger for
lower priced homes. Because it may take as long as two months to close on a home
after signing a contract, first-time buyers must act fairly soon to take
advantage of the $8,000 tax credit because they must close on the sale by Nov.
30.”
The Pending Home Sales Index in the Northeast rose 0.4 percent to 81.2 in June
and is 5.8 percent above a year ago. In the Midwest the index increased 0.8
percent to 89.9 and is 11.6 percent above June 2008. The index in the South
jumped 7.1 percent to 100.7 in June and is 8.9 percent higher than a year ago.
In the West the index rose 2.9 percent to 100.4 but is 0.2 percent below June
2008.
NAR President Charles McMillan is hopeful that a recently elevated level of
contract cancellations will ease. “Last month, Freddie Mac and Fannie Mae
clarified that appraisals should be done by professionals with clear local
expertise,” he said. “This should mitigate the situation of many valuations done
by out-of-area appraisers coming in below the price negotiated between buyers
and sellers. Hopefully, in the months ahead, we’ll see an even closer
relationship between contract activity and closed transactions.”
McMillan said NAR is continuing to press the appraisal issue. “We have asked
Congress and the Federal Housing Finance Agency to immediately implement an
18-month moratorium on the new appraisal rules to further address unintended
consequences of the new guidelines,” he said.
NAR’s Housing Affordability Index remains very favorable. The affordability
index stood at 159.2 in July, down from record peaks in recent months but it
remains 36.6 percentage points above a year ago. Under these conditions, the
typical family would devote 15.7 percent of gross income to mortgage principal
and interest, well below the standard allowance of 25 percent.
The HAI is a broad measure of housing affordability using consistent values and
assumptions over time, which examines the relationship between home prices,
mortgage interest rates and family income.
“A monthly rise in home prices and somewhat higher mortgage interest rates led
to a modest decline in affordability in June, but it was still the sixth highest
index on record dating back to 1970,” Yun said. “Because housing is so
affordable in today’s market, job security and the first-time buyer tax credit
are bigger factors in influencing home sales.”
A median-income family earning $60,700 could afford a home costing $289,100 in
June with a 20 percent downpayment, assuming 25 percent of gross income is
devoted to mortgage principal and interest. Affordability conditions for
first-time buyers with the same income and small downpayments are roughly 80
percent of what a median-income family can afford. The affordable price was much
higher than the median existing single-family home price in June, which was
$181,600.
Yun expects existing-home sales to gradually rise over the balance of the year,
with conditions varying around the country. “It appears home sales are on a
sounder footing and inventory is gradually being absorbed.”
© 2009 FLORIDA ASSOCIATION OF REALTORS®
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