WASHINGTON — Following a sharp drop in the months immediate after expiration of the home buyer tax credit, pending home sales have modestly risen, according to the National Association of Realtors®.

NAR’s Pending Home Sales Index, which measures home sale deals in which a contract has been signed but the transaction has not yet closed, rose 5.2% in July compared to June, but remains 19.1% below July 2009.  

NAR chief economist Lawrence Yun predicted a long recovery process despite the rise in the PHSI. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” he said. “But the recovery looks to be a long process. Home buyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.

“Affordability could reach a generational high in the second half of this year because of rock-bottom mortgage interest rates, helped partly by the Fed’s very accommodative monetary policy,” Yun said. “The loan underwriting standards are tighter, but home buyers can improve their chances of getting a loan by staying well within their budget.”

Regional pending home sales

The PHSI in the Northeast rose 6.3% in July, but is 21.1% below a year ago. In the Midwest the index increased 4.1%, but remains 25.7% below July 2009. Pending home sales in the South rose 1.2%, but are 15.6% lower than a year ago. In the West the index jumped 11.6%, but is 17.6% below July 2009.

Source: NAR