Pending Home Sales Drop, NAR Reports

Posted by Orb Staff on July 02, 2010 No Comments
Categories : Residential Mortgage

ing a surge driven by the home-buyer tax credit, pending home sales fell with the expiration of the deadline for qualified buyers to sign a purchase contract, according to the National Association of Realtors (NAR). The Pending Home Sales Index, a forward-looking indicator, dropped 30% to 77.6 based on contracts signed in May from a reading of 110.9 in April, and is 15.9% below May 2009, when it was 92.3. The falloff comes on the heels of three strong monthly gains as home buyers rushed to take advantage of the tax credit. The data reflects contracts and not closings, which normally occur with a lag time of one or two months. However, many closings have been delayed recently from a rush of buyers into the system and slow processing of short sales, in addition to the heavy volume and a more thorough loan underwriting process, NAR says. As many as 180,000 buyers who signed contracts by April 30 may have missed the June 30 closing deadline for the tax credit. However, legislation passed by Congress this week would extend the deadline for delayed contracts through Sept. 30. ‘The sharp decline in contract signings in May is a natural result, with similar low levels of sales activity anticipated in June," says Lawrence Yun, NAR's chief economist. "Surprisingly, though, some local markets, such as Portland, Maine, and Jacksonville, Fla., actually experienced an increase in contract signings from a year ago without the tax credit.’ Congress has also [link=http://www.realtor.org/press_room/news_releases/2010/07/tax_flood_credits]reauthorized the National Flood Insurance Program[/link]. NAR says that many lenders were hesitant to approve mortgages on homes needing flood insurance without congressional action, and numerous sales have been on hold. The action is retroactive to a temporary authorization that expired May 31 and, like the tax-credit extension, is expected to be signed by President Obama. Yun noted the tax credit has broadly stabilized home prices. "Without the tax credit, there will be more aggressive price negotiations between buyers and sellers,’ he says. ‘The key test on whether the housing market can stand on its own without stimulus medicine will depend critically on private-sector job creation in the second half of the year. We'll also keep a close eye on market conditions on the Gulf Coast." Through May, 495,000 net private-sector jobs had been created. NAR's forecast for employment growth is about 1 million additional net new jobs over the balance of the year and another 2 million in 2011. "If jobs come back as expected, the pace of home sales should pick up later this year and reach a sustainable level of activity, given very favorable affordability conditions," Yun adds. SOURCE: [link=http://www.realtor.org/press_room/news_releases/2010/07/phs_drop]National Association of Realtors

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