WASHINGTON (January 5, 2010) – Contract activity for pending-home sales fell 16% in November, after a surge of activity in October fueled by buyers looking to beat the original deadline for the first-time homebuyer tax credit. However, it’s still 15% above where it was at this time last year, according to the National Association of Realtors’® Pending Home Sale Index.
The PHSI measures pending sales of existing homes, meaning sales for which a contract is signed, but the deal hasn’t closed. Home sales typically take one to two months to reach closing.
NAR chief economist Lawrence Yun expected the drop. “It will be at least early spring before we see notable gains in sales activity as homebuyers respond to the recently extended and expanded tax credit,” he said. “The fact that pending-home sales are comfortably above year-ago levels shows the market has gained sufficient momentum on its own. We expect another surge in the spring as more homebuyers take advantage of affordable housing conditions before the tax credit expires.”
Buyers who have a contract in place to purchase a primary residence by April 30, 2010, have until June 30, 2010, to finalize the transaction to qualify for the tax credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Yun projects an additional 900,000 first-time buyers will qualify for the extended tax credit in addition to about 2 million who have already purchased; 1.5 million repeat buyers also are expected to benefit from the credit.
“Many trade-up buyers, who have historically timed their purchase based on school-year considerations, will have to accelerate their buying plans if they need the tax credit to make a trade,” Yun said. Repeat buyers don’t have to sell their existing home to qualify for the credit, but they must occupy the home they buy as their primary residence.
Interest rates are another factor that influences home purchase activity. Yun warned that mortgage interest rates can’t remain at rock-bottom levels for a sustained period and will likely inch higher in 2010. But the tax credit impact in the first half of the year.
He also predicts job growth in the second half of the year will support homebuying activity and absorb enough inventory to bring a rough balance between buyers and sellers. That would cause home prices to stabilize or even modestly rise as a result in 2010, he said.
Regional home sales
Pending home sales in the Northeast dropped 25.7% in November (14.7% above a year ago). In the Midwest, the index fell 25.7%, (9.2% above a year ago). Pending home sales in the South fell 15% (14.7% higher than a year ago). In the West, the index declined 2.7% (21.4% above November 2008).
Source: NAR
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