Low Rates Greases 3 Months of Rising Salesby Tim Manni
Historically-low mortgage rates and the first-time homebuyer tax credit helped boost U.S. Pending Home Sales in April for the third straight month. According to the National Association of Realtors (NAR), Pending Home Sales increased by 6.7% in April, lifting the monthly reading to 90.3, up from 84.6 in March.
Lawrence Yun, NAR chief economist, said buyers are responding to very favorable market conditions. “Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market,” he said. “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.”
Yun expects the NAR’s Existing Home Sales Index, a separate report which calculates sales after the contract is finalized, to rise throughout the end of the year. But new-home sales, according to Yun, is a different story:
With mortgage rates hovering near all-time lows, housing affordability has improved, said Lawrence Yun, chief economist for the NAR. Yun expects existing-home sales to rise about 17% by the end of the year to a seasonally adjusted annual rate of 5.48 million. Sales of new homes, by contrast, are expected to fall another 12% to a 308,000 annual rate.
The NAR says home affordability is at an all-time high. The index rose to 174.8 in April, from an upwardly revised 171.9 in March.
If housing reports like these can continue to trend upward, the market will begin to get a sincere sense of a turnaround. Keep your eye on home prices — when they stop falling we’ll be well on our way.