Pending Home Sales Down

According to a new report released Tuesday by the ""National Association of Realtors"":http://www.realtor.org (NAR), pending home sales declined on the heels of a weakening economy as buyers awaited clarity on the federal government's housing stimulus provisions.
NAR's ""Pending Home Sales Index"":http://www.realtor.org/research/research/phsdata (PHSI), a forward-looking indicator based on mortgage contracts signed in January, fell 7.7 percent from December's reading. The figure is 6.4 percent below January 2008 and has hit the lowest level seen since tracking began in 2001, NAR said.
Lawrence Yun, NAR chief economist, said the downturn in the economy weighed heavily on the data. ""Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales,"" Yun said. ""We expect similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions and from the $8,000 first-time buyer tax credit.""
NAR reported that the PHSI in the Northeast region dropped 12.7 percent in January and is 19.7 percent below a year ago. In the Midwest the index declined 9.2 percent; down 13.8 percent from January 2008. The index in the South fell 11.9 percent from December to January, with a 9.1 percent annual decline. But in the West, NAR said, the index rose 2.4 percent and is 13.5 percent higher than January 2008.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said it’s ironic with the weak housing market that affordability conditions have improved dramatically. ""Housing affordability is at a record high - the buying power of a typical family has risen significantly,"" McMillan explained. ""With the drop in interest rates, a median-income family can afford a home costing $20,000 more than a year ago for the same monthly mortgage payment. With the strong housing stimulus, we are hopeful inventory will get trimmed, which will help prices stabilize in many areas by the end of this year,"" he said.
NAR’s ""Housing Affordability Index"":http://www.realtor.org/research/research/housinginx (HAI) rose 13.6 percentage points in January, reaching a new record high. The HAI, a broad index of affordability using consistent values and assumptions over time, shows that the relationship between home prices, mortgage interest rates, and family income is the most favorable since NAR began tracking the stat in 1970.
According to NAR, the HAI indicates that a median-income family, earning $59,800, could afford a home costing $283,400 in January 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 that amount, NAR explained. By comparison, a year ago, the typical family could afford a home costing $263,300.
Yun said, ""Conditions have been aligning very favorably for home buyers with the exception of consumer confidence. But I am hopeful that sales will turn around by late spring and early summer because history suggests that home sales can rise even in times of job losses when housing affordability rises.""