Pending Home Sales Show Healthy Gain

WASHINGTON, February 3, 2009
Pending home sales increased as more buyers took advantage of improved affordability conditions, according to the National Association of Realtors ®. Big gains in the South and Midwest offset modest declines in other regions.

Lawrence Yun, NAR chief economist, said the index shows a modest rebound. “The monthly gain in pending home sales, spurred by buyers responding to lower home prices and mortgage interest rates, more than offset an index decline in the previous month,” he said. “The biggest gains were in areas with the biggest improvements in affordability. “

“Significant uncertainty still clouds the housing market despite improved affordability conditions. For a sustainable housing market recovery and hence, sustainable economic recovery, we need a significant housing stimulus and mortgage availability for qualified borrowers,” Yun added.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said the rise in contract signings is encouraging. “However, housing activity remains weak compared with potential demand, and the market is fragile given the economic backdrop,” he said.

“We can’t take our eye off the need to stimulate housing, which can set the foundation for an economic recovery,” McMillan said. “Last week’s actions in the House to eliminate the repayment feature on the first-time home buyer tax credit, and to raise mortgage loan limits, are helpful. However, we need to take additional steps to meaningfully draw down inventory and stabilize home prices.”

Yun said the outlook for housing and the economy is murky. “Although Congress and the Obama administration are taking steps to help the economy, the stimulus package must deal with the root cause of the economic downturn, and apply the right fix to turn it around. If housing is ignored, a significant downward overshooting of home prices would continue to drag the economy down independent of the scale of the stimulus,” Yun said.

*I believe the best way to rectify the current economic malice isn’t spending money we don’t have. To create inefficient short term jobs through make-work projects, but to make loans more accessible to those who qualify by income and create a self-correcting housing market based on a sound foundation and reasonably recasting the adjustable rate mortgages of predatory lenders due shortly to reset a ludicrous rate. The net result would create a ripple effect in the economy and create jobs as a natural consequence rather than through a short term artificial stimulus. The serious economic downturn started in the housing industry and that’s where the corrections would be most effective in establishing consumer confidence and hope.

*Note: The above is the view of the author, Don Haws, only and does not represent any view taken or written by Coldwell Banker.