May’s steep drop in pending home sales did a great job forecasting the steep decline in existing home sales, but today’s release of July index, which is designed to measure contracts for existing home sales that have been signed but not yet closed, suggests that housing may be stabilizing.
The Pending Home Sales Index released by the National Association of Realtors climbed by 5.2% to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June, but remains 19.1% below July 2009 when it was 98.1.
NAR chief economist Lawrence Yun did not provide much comfort for those looking for a quick rebound, noting, “Home sales will remain soft in the months ahead…and 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.”
He went on to say that those who bought near the peak in bubble markets might not fully recover their lost equity for over a decade, but Yun does believe that “improved affordability conditions should help with a recovery.”
The housing market received a nice boost from the first time and repeat buyers tax credit; however, the market cratered (see Existing home sales plunge to 15-year low) following the credit’s expiration, signaling that many potential buyers moved up purchases to take advantage of the extra cash. Hence, it now appears that the credit served mostly to whipsaw demand and distort the market.
Yun is correct, however. Affordability is high right now due to record low mortgage rates and prices that are off their highs. But many potential buyers remain on the sidelines amid concerns about the economy, still-high foreclosures and just a plain high level of uncertainty.
Until the job market picks back up and prices are on a firmer foundation, the negatives seem more likely to outweigh the positives.
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