Record low mortgage interest rates boosted pending home sales for the third consecutive month, according to the latest report from the ""National Association of Realtors"":http://www.realtor.org (NAR). The association's national ""Pending Home Sales Index"":http://www.realtor.org/research/research/phsdata, a forward-looking indicator based on contracts signed in April, rose 6.7 percent from March and is 3.2 percent above April 2008.
Lawrence Yun, NAR chief economist, says the spike in expected home sales can be attributed to a more favorable buying environment. ""Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market,"" Yun explained. ""Since first-time buyers must finalize their purchase by November 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers.""
Regionally, NAR's Pending Home Sales Index (PHSI) showed a monthly increase in expected property purchases in every part of the country except the South, where the index dipped less than a quarter of a percentage point. The PHSI in the Northeast shot up 32.6 percent in April, and is 0.8 percent above a year ago. In the Midwest the index rose 9.8 percent, and is 11.1 percent higher than April 2008. The index in the South slipped 0.2 percent in April, but is still 3.5 percent above a year ago. In the West the PHSI rose 1.8 percent for the month but is down 2.9 percent from April 2008.
NAR’s ""Housing Affordability Index"":http://www.realtor.org/research/research/housinginx (HAI) is in record territory. HAI is a measurement based on the relationship between home prices, mortgage interest rates, and family income. And April's calculation was the second highest monthly reading on record since tracking began in 1970 (behind only January of this year). NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, pointed out that there are a number of legitimate government and nonprofit buyer-assistance programs in place, including the Federal Housing Administration's recently announced tax credit allowance, which can help make buying a home even more affordable.
According to NAR, a median-income family, earning $60,900, could afford a home costing $296,800 in April 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 also noted that the affordable price was well above the median existing single-family home price in April, which was $169,800.
NAR said in its report that existing-home sale numbers are expected to improve in coming months, but with dramatic local market variation in the timing of recovery. Yun explained, ""The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline.""
Yun cautions that the reporting sample for pending home sales is smaller than that of existing-home sales, so it is subject to greater variability. ""In addition, the relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons,"" Yun said. ""Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval, and some sales are falling through at the last moment.""