The National Association of Realtors announced today that pending sales of U.S. existing homes rose by 8.2% in February, representing the second-biggest gain recorded by the pending homes sales index (PHSI) and the largest since October 2001. Pending sales, which tally contract signings, are considered to be a leading indicator of economic activity. This news, along with March’s positive jobs report, indicates that the housing market and the American economy at large are on the right path towards a sustained recovery.
Home sales in April are expected to increase as buyers take advantage of low current mortgage rates and a homebuyer tax credit that will be expiring at the end of the month. With the Federal Reserve recently ceasing its purchasing of mortgage bonds, however, it will be interesting to see how homebuyers respond to market conditions void of heavy government participation and incentives that kept mortgage rates near all time lows. According to Michael Feroli, chief U.S. economist at JPMorgan Chase & Co, even if the increase in home sales is inspired by the homebuyer tax credit, “if what we’re seeing in the labor market is actually showing decent growth, then I would expect housing would follow along.”
Pending home sales increased significantly in three out of four regions in the United States in February, with the Midwest experiencing a surge of 22%. Purchases increased by 9.2% in the South and 9% in the Northeast. Only the Western region of the United State experienced a decrease of 4.8%. These increases in the pending sales of existing homes are essential to the resurgence of the American housing market, as they reduce inventory and help stabilize home values.
With the aforementioned departure of the Federal Reserve from the mortgage bond industry, mortgage rates have already started to rise and are expected to continue to do so throughout the year. Additionally, the homebuyer tax credit will be expiring at the end of this month on April 30. If you are interested in purchasing a new home or refinancing your existing one, now is the great time to take advantage of low mortgage rates and homebuyer incentives by calling 877-868-2509 to speak with one of our mortgage experts.
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Donovan
April 8, 2010 @ 2:39 pm
While an increase in home sales can definitely be a good measure of economic activity, there are many factors that go into it and it must be examined further. For example, what types of houses are being sold? Are prices up or down? Sales could increase drastically for any product if the price was cut tremendously. This is one thing that has happened in the real estate market. Also, many properties are bank owned homes. These need to be sold and put into better hands, but they are not the traditional home sales that we are used to.
It is a different time and we need look at some different things.
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