Increase in Pending Home Sales for July

A much needed ray of sunshine peaked out of the clouds on Thursday when the National Association of Realtors® released their Pending Home Sales Index report, showing a 5.2 increase in pending sales for July.  

Although the NAR sales index, now at 79.4 is up from 75.5 for June, pending sales are still 19.1% lower than July, 2009.  Pending home sales were projected to fall 1%, according to the median forecast of 37 economists surveyed by Bloomberg News.

Lawrence Yun, NAR chief economist, commented that it would be a long recovery process. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery.”  

Yun went on to say that ‘Home buyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.”

The index declined 2.8% in June from May, when it plummeted 29.9% from the prior month.  The NAR believes the drop for these months was due to the expiration of the federal homebuyer tax credit, which ended on April 30th. 

Prospective homebuyers had until September 30th to close the deal on a signed contract to qualify for the $8,000 first-time homebuyer tax credit.

Pending Homes Sales Nationwide for July

• In the Northeast the index rose 6.3 percent to 62.5 in July, but still remains 21.1 percent below a year ago.
• In the Midwest the index increased 4.1 percent to 66.7 but still remains 25.7 percent below a year ago.
• In the South the index rose 1.2 percent to 86.3, but still remains 15.6 percent blow a year ago.
• In the West the index rose 11.6 percent to 95.0, but is still 17.6 percent below a year ago.

According to Yelena Shulyatyeva, an economist at BNP Paribas in New York, “The July rebound points to some stabilization in existing home sales at very low levels in August.”  She went on to say that “The housing market outlook remains highly uncertain in light of mounting inventories from foreclosed and vacant properties.”

Although record low mortgage rates are helping to make homes more affordable, we still need to see improvements in our nation’s unemployment rate.  “The rate of layoffs is still uncomfortably high,” said Chris Low, chief economist at FTN Financial in New York.

The modest 5.2 increase in pending home sales for July does give us a glimmer of hope that we are at least ‘headed towards stabilization and recovery,’ even if the foundations for a firm recovery may not be fully in place yet.  The NAR will release the next Pending Home Sales Index report on October 4th, 2010.

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Article sources:
Bloomberg News
National Association of Realtors®
RealtyTimes