Pending Home Sales Up in Sign of Life for Housing
April 1, 2009Tentative signs of life are appearing in the long-battered U.S. housing market.
Thanks to historically low mortgage rates and deeply discounted prices, homes in much of the country are now the most affordable in decades. First-time homebuyers are now able to take advantage of a new $8,000 tax credit that runs until Dec. 1.
Still, any recovery for the spring selling season is likely to be modest. And it could evaporate if the economy, already mired in a severe recession, deteriorates much more.
If buyers return, it would be a great relief to stressed homeowners like Jennifer Folkerson, 42, who lives outside Salt Lake City. She and her family moved to a new home last fall but have had no luck selling the old one. Saddled with two mortgages, she now has both houses up for sale.
"There have been tons of lookers," she said, but "not one single person who can get approved for a loan right now."
Because of falling home prices and mortgage rates of around 5 percent or lower, homeownership is more affordable than it has been since at least 1970, the National Association of Realtors said Wednesday.
Prices, however, are expected to keep falling in some parts of the country, and some analysts don't see a national bottom in home prices until the second half of 2010. "We do expect the pace of decline to start to moderate over the next several months," Barclays Capital analyst Michelle Meyer wrote this week.
Tens of thousands of homes are tied up in foreclosure and will be coming on the market. Plus, as the recession deepens and job losses mount, many buyers are likely to stay on the sidelines.
But there were indications Wednesday that a few more homebuyers are ready to take the plunge. The National Association of Realtors said its index of signed sales contracts for previously occupied homes rose 2.1 percent to 82.1 in February from January's record low of 80.4.
Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future home sales. However, some economists say the index has been an unreliable predictor in recent months.
Existing home sales rose 5.1 percent in February, the largest increase in nearly six years. Sales of new homes, meanwhile, rose 4.7 percent that month from January's record low.
And March sales of new homes were up for Lennar Corp., the chief executive said Tuesday.
"While there are, to be sure, some indicators that suggest that the market is beginning to stabilize, they do not feel like they are defining a trend yet," said CEO Stuart Miller.
Trying to unload its huge inventory of unsold homes, Lennar this week began advertising a 3.6 percent fixed-rate mortgage on its already-built homes.
Mortgage rates across the board fell dramatically over the winter, and fell further last month after the Federal Reserve said it would buy $1.2 trillion in mortgage-backed securities and $300 billion in long-term government debt.
Most of the benefit from low rates has gone to buyers seeking to refinance their existing home loans, rather than new buyers.
The Mortgage Bankers Association said Wednesday its weekly application index climbed 3 percent last week and was at the highest level since mid-January. Nearly 80 percent of applications came from borrowers seeking to refinance home loans at lower rates.
Associated Press Writer Rette Speight contributed to this report from Salt Lake City.
(Copyright 2009 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)