"Tentative home shoppers are jumping off the fence and into homeownership as prices linger low, reduced interest rates persist and the sun begins to set on the federal government's $8,000 historic tax credit for first-time homebuyers.
On Aug. 4, 2009 the National Association of Realtors® reported an increase in pending home sales for the fifth consecutive month, 'the first time in six years for such a streak.'
The Pending Home Sales Index is an indicator based on contracts signed in June 2009. According to NAR, a sale is listed as 'pending' when a contract is signed but the transaction is not closed. Most sales finalize within a month or two.
The index uses contract activity in 2001 (the first year that was examined for this specific data) as a baseline. 'An index of 100 is equal to the average level of contract activity during 2001.' That year was the first of five consecutive record years for existing-home sales.
Contracts signed in June 2009 were up 3.6 percent and settled at an index of 94.6 (remember that 2001 is the baseline - 'the good old days'). That's great news because May's reading came in at 91.3. When compared to June 2008, the June 2009 index reading is even more impressive. June 2008 was indexed at 88.7 (grueling). June 2009 numbers show a 6.7 percent improvement over last year.
It's true that a slight increase here and there can be a fluke, but it is the first time since July 2003 that we've seen an increase for five months straight. Cautious optimism is in order here.
NAR Chief Economist Lawrence Yun attributes the gain to several market factors including:
Historically low mortgage interest rates
Affordable home prices
A federal $8,000 tax credit for first-time homebuyers"