Pending Home Sales Are On The Rise According to NAR
By Kyle Smith
Market indicators for the first three months of 2009 are showing signs of hope based on recent pending home sales. With many first-time buyers taking advantage of near record-high housing affordability conditions, and record low interest rates according to the latest report released by the National Association of Realtors (NAR) on Monday.
NAR's Pending Home Sales Index, which looks at recent real estate contract sales as a barometer of future activity, reflects some signs of promise. Contracts written in March of 2009 show a 3.2 percent increase over contracts written in February of this year. That is 1.1% higher than contracts written in March of 2008.
According to Lawrence Yun, NAR chief economist, states it may take a few months for the market to gain momentum, but current signs are encouraging. This increase could be the leading edge of first-time buyers responding to the $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a downpayment," Yun said. "We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around."
A regional perspective shows the southern and western sectors of the nation saw improvements in their localized pending home sales. NAR reported that the index in the South rose 8.5 percent in March and is 7.7 percent above a year ago.
NAR's overall Housing Affordability Index (HAI) continues to linger near record highs. In layman's terms, one can buy more home for the same or less money than in recent years. Homes provide a unique opportunity to generate tax benefits, while appreciating in value. Tyler and the East Texas market have seen little effect in home prices over the last 18-24 months. Market time, the time a home spends on the market before a contract is received has increased, but only a few segments of the market have seen prices fall as sellers have proven willing to wait for the market jitters to settle before taking less for their homes.
According to NAR, a median-income family, earning $61,100, could afford a home costing $291,600 in March with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of that amount, NAR said. The affordable price was notably higher than the median existing single-family home price in March, which was $174,900.
Tyler has seen an increase in foreclosures over the last 18 months. The largest part of the foreclosures has been in the investment sector as many investors chose to accept adjustable rate mortgages (ARM's) for their lower interest rates. However, those adjustable rate mortgages began to reset over the last 18 months, and now they find themselves unable to cover the increase in mortgage payments. I have seen a large increase in the number of investors who have taken money out of the stock market and paid cash for investment properties. This has created a significant return on investment with the affordability of investment properties, and a rise in prospective tenants searching for housing in an already tight market. Foreclosures have forced a lot of tenants to relocate, and the loss of available properties has push demand well over the supply of homes available for rent.
What does this mean to you? Whether you are a first time home buyer, a buyer looking to move up to a larger home, or an investor interested in diversify your holdings, now is the time to act. If the market continues to improve, and interest rates begin to rise as has been predicted by many leading economist, this affordability may not hold out for long. Talk to a Realtor® in your area to see if the time is right for you to purchase a home.
Kyle Smith is a Real Estate Consultant with Keller Williams Realty in Tyler, Texas.
