The housing outlook, based on pending home sales, improved with many first-time buyers taking advantage of near record-high housing affordability conditions, according to the latest report released by the ""National Association of Realtors"":http://www.realtor.org (NAR) on Monday.
NAR's ""Pending Home Sales Index"":http://www.realtor.org/research/research/phsdata, a forward-looking indicator based on contracts signed in March, increased 3.2 percent from February, and is 1.1 percent higher than March 2008.
According to Lawrence Yun, NAR chief economist, it should take a few months for the market to gain momentum. ""This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a downpayment,"" Yun said. ""We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around.""
Looking at the regional level, the southern and western parts of the country saw improvements in their localized pending home sales. NAR reported that the index in the South rose 8.5 percent in March and is 7.7 percent above a year ago. In the West, the index increased 3.9 percent and is 1.7 percent higher than March 2008.
However, the Northeast and Midwest regions didn't fare as well. The index in the Northeast fell 5.7 percent in March, contributing to its annual decline of 24.1 percent. In the Midwest, the Pending Home Sales Index slipped 1.0 percent for the month, but is 8.2 percent higher than in March 2008.
NAR's overall ""Housing Affordability Index"":http://www.realtor.org/research/research/housinginx (HAI) continues to linger near record highs. The affordability index was 166.7 in March - down from an upwardly revised record of 174.4 in February, due to higher home prices in March. The index remains 30.8 percentage points higher than a year ago. NAR's 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.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, commented that the increase in buying power is quite remarkable. ""Compared to a year ago, the typical family can pay much less in mortgage costs for the same home, or buy a better home without necessarily increasing their monthly payment,"" McMillan explained. ""For buyers who’ve been on the sidelines and have good jobs, the market has never looked more favorable. Homeownership has always offered immediate benefits and long-term value, but the advantages in today’s market are unique.""
According to NAR, a median-income family, earning $61,100, could afford a home costing $291,600 in March 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 said. The affordable price was notably higher than the median existing single-family home price in March, which was $174,900.