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Pending Home Sales Surge for Third Consecutive Month

In a reflection of the broad impact of the homebuyer tax credit and favorable housing affordability conditions, April marked the third consecutive month that pending homes sales have risen, the ""National Association of Realtors"":http://www.realtor.org/ (NAR) reported Wednesday.

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NAR's ""Pending Home Sales Index"":http://www.realtor.org/press_room/news_releases/2010/06/pending_surge, a forward-looking indicator based on contracts signed during the month, rose to 110.9 in April as buyers rushed to sign contracts before the April 30 deadline of the extended and expanded homebuyer tax credit. The index climbed 6 percent from March and soared 22.4 percent from April of last year. This increase followed a 7.1 percent jump in pending sales in March and an 8.3 percent uptick in February.

According to NAR, April's pending home sales were at the highest level seen since last October when the index reached 112.4 as first-time homebuyers were rushing to beat the initial deadline for the tax credit.

Lawrence Yun, NAR chief economist, said the second round of soaring sales as a result of the tax credit extension looked to be as strong as the increase in sales from the original tax credit. ""There were concerns that only a small pool of buyers were left to take advantage of the tax credit exten-

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sion,"" he said. ""But evidently the tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to surging sales.""

Yun said the tax credit brought close to 1 million additional buyers into the market, which is now helping the trade-up market and has significantly improved the inventory situation. In addition, he said the surge in buyers stabilized home prices more quickly and preserved about $900 billion in home equity. This, Yun said, is keeping additional households from going underwater and utlimately risking foreclosure

However, Yun said a big concern surfacing recently is insufficient time to close the deal at the settlement table. In order to qualify for the tax credit, homebuyers had to sign a contract by April 30, and they must close by June 30. While two months would be enough time from contract signing to settlement date under normal circumstances, Yun said the recent housing cycle has brought long delays related to the short sales approval process by banks and from ongoing appraisal issues.

As a result, Yun said there could be a sizable number of homebuyers who responded to tax credit incentives, but may encounter problems meeting the settlement by the deadline of June 30. Because of these market challenges, NAR has asked Congress to provide flexibility on the deadline for closing.

Going forward, Yun said the housing market has to ""get back on its own feet."" He said the market now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs. And the job situation seems to be improving, as NAR expects a net of 1 million new jobs to be added in the second half of this year and about 2 million additional jobs in 2011.

About Author: Brittany Dunn

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