Confounding analysts who had predicted a contraction, pending home sales rose for the ninth straight month in October. Pending home sales are considered by analysts to be an indicator of where the real estate market is heading.
According to the Pending Homes Sales Index posted by the National Association of Realtors (NAR) pending homes sales - which are based on sales contracts signed the previous month- rose once again in November by 3.7%. Economists had predicted a fall of approximately 1%.
This continuing surge in home sales suggests that the housing market, considered the main culprit in our recession, may be headed for recovery, following its 3 year decline.
The NAR’s Pending Home Sales Index is also up almost 32% from its figures in October of 2008. NPR reports the largest increase in homes sales contracts occurred in the Northeast, where pending sales bulled their way forward by almost 20%. In the Midwest, numbers were up by 11.6%, and in the south, by5.4%. In a bow to the rugged individualism for which it is famous, the west declined by 11.2%.
However, just to keep things in perspective, Lawrence Yun, the NAR;s chief economist, intimated that we may see a slight decline in home sales in coming months because of the recently extended tax credit. Often, 3-5 months may pass between a buyer’s initial search and the final closing of the sale. The next sales uptick is likely to be in mid to late February, when the next rush to beat $8,000 home buyer tax credit deadline commences.
Meanwhile, in an effort to keep the housing market hopping, the Federal Reserve says it will do its best to maintain near zero benchmark interest rates for as long as is economically feasible. Currently, a 30 year fixed mortgage is averaging 4.78%, which Bloomberg says is the lowest rate since 1972, the year Freddie Mac began its record keeping process.
The housing market continues to post impressive stats. Current sales figures for new and existing homes stood at 6.5 million as of October, a level that has not been seen since June of 2007. In addition, the Census Bureau says that there was a 3.9% increase in spending on new residential construction in October. As a result, Reuters reported that housing construction actually made a contribution to the economy. This has not occurred since 2005.
In better news, the number of unsold homes has dropped down to a 7 month supply. One year ago, realtors shelves held a 10.3 month inventory of homes, waiting for buyers to adopt them.
Still putting a damper on sustained housing growth is, of course, the high unemployment rate, which is running close to 11% on average. Also, record numbers of foreclosures that have not yet been released by banks may pose a threat to the seemingly firming bottom of the market.
Written by Marc Jablon, Realty Associates
marcjablon@yahoo.com / 561 / 213 – 6139
www.marcjablonhomes.com/
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