Although they do not constitute closed deals, the impressive 3.7% increase in signed contracts to purchase homes in October certainly indicates the housing market is on the mend. If this increase is not enough proof the housing market is rebounding, then the National Association of Realtors’ report of a record nine consecutive months increases in signed contracts should.
Coupled with today’s announcement that job losses were nearly 114,000 less than originally forecasted for November – and well below any job loss post over the last 23 months – the increase in purchase contracts is welcome news to the economy as a whole. Since the inception of the National Association of Realtors’ Pending Home Sales Index, the 3.7% increase of signed contracts in October also represents the largest gain ever in a single year. Today, the index stands at 114.1, while it was merely 86.6 just one year ago, a remarkable 31.8% increase. Furthermore, the good news continues with the number of available homes on the market declining, which removes the bloat from this sector of the industry that has caused low home values.
The federal government’s extension to the $8,000 first-time homebuyer tax credit and implementation of the new $6,500 “move up” homebuyer tax credit will also begin to show positive effects in the index in the coming months. Additionally, the near-record-low current mortgage rates the industry has been experiencing will absolutely assist in increasing these numbers further.
There’s little doubt the original expiration of the $8,000 first-time homebuyer tax credit pushed October buyers into signing on the dotted line to close by the November 30 deadline. Although, because the newly expanded tax credits have only become available for less than a month, November contracts may decline slightly due to the time it takes to close a loan once a contract is signed. Given the lag time, there will likely be another surge from December through the end of April, when the federal tax credits are due to expire again.
Hindsight being 20/20, the extension of the original $8,000 first-time homebuyer tax credit was a no-brainer. The extension and implementation of the tax credits should help keep home sales on the upside until the economy stabilizes further and markets return to normal. Market analysts believe the housing market should return to more normal levels, with more firm home prices, by summer 2010.
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