Pending Home Sales Up Sharply

Daily Real Estate News | October 8, 2008
Pending Home Sales Up Sharply

Pending home sales activity surged as buyers took advantage of low home prices and affordable interest rates, according to the NATIONAL ASSOCIATION OF
REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in August, jumped 7.4 percent to 93.4 from an upwardly revised reading of 87.0 in July, and is 8.8 percent higher than August 2007 when it stood at 85.8. The index is at the highest level since June 2007 when it stood at 101.4.

Improved Affordability

Lawrence Yun, NAR chief economist, says home buyers were responding to improved affordability. “What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island, and the Washington, D.C., region,” he says.

“The improvement also reflects the drop in mortgage interest rates after the government takeover of Freddie Mac and Fannie Mae. It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales", adds Yun.

The PHSI in the West surged 18.4 percent to 109.5 in August and remains 37.8 percent above a year ago. In the Northeast the index jumped 8.4 percent to 79.8 and is 2.0 percent higher than August 2007. The index in the Midwest rose 3.6 percent to 84.5 in August and is 6.6 percent above a year ago. In the South, the index increased 2.3 percent to 96.0 but is 2.1 percent below August 2007.

Yun notes the unusual timing of contract activity in August. “Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie,” he said. “August shows some unleashing of pent-up demand before the credit crisis accelerated in September.”

He cautioned that the sampling size for pending home sales is smaller than the track on existing-home sales, so there is more volatility in the forward-looking series. “We need to see just how much of this gain holds up,” Yun adds.

NAR President Richard F. Gaylord says despite all the turmoil in world financial markets, home mortgages are available. “The recently enacted economic stimulus package should help housing by gradually freeing the flow of credit," he says.

Yun now expects growth in the U.S. gross domestic product (GDP) to contract for two consecutive quarters, in the fourth quarter of this year and the first quarter of 2009, before expanding in latter part of 2009 as the housing market begins a steady improvement.

Existing-home sales projected to rise next year

Looking at middle-ground assumptions, existing-home sales are forecast at 5.04 million this year and 5.41 million in 2009. Following national declines of 5 to 8 percent in 2008, home prices are projected to increase 2 to 3 percent next year.

New-home sales should total around 503,000 this year and 471,000 in 2009. Housing starts, including multifamily units, are likely to fall 28.2 percent to 973,000 units this year, and come in around 843,000 in 2009 as builders continue to clear the accumulation in inventory.

The 30-year fixed-rate mortgage will probably average 6.1 percent in the fourth quarter and rise gradually to 6.6 percent by the end of 2009. NAR’s housing affordability index is expected to average 18 percentage points higher this year than in 2007.

The unemployment rate is projected to average 6.4 percent in the fourth quarter and then average 6.6 percent in 2009. Inflation, as measured by the Consumer Price Index, is estimated at 4.0 percent for 2008 and 2.0 percent next year. Inflation-adjusted disposable personal income is forecast to grow 1.7 percent this year and 1.0 percent in 2009.

What comes with the house?

Surprisingly, there are a lot of confusion what should or should not come with a house...

The general rule is whatever is attached to the property, it has to stay...In reality it is more complex than that...

Not to have any confusion or argurment later on, I suggest Buyer and Seller read carefully "Included" and "Excluded" areas of the contract...And,

Traditionally speaking unless specified otherwise, following items are included when you sell the house:

1. plumbing, heating, air conditioning fixtures and equipment
2. ceiling fans
3. water heater
4. built-in appliances
5. light fixtures and bulbs
6. bathroom fixtures
7. curtains
8. draperies and rods
9. window and door screens
10. storm doors and windows
11. window blinds
12. awnings
13. installed television antenna
14. satellite diches and system
15. permanetly affixed carpets
16. automatica garage door openers and accompanying trasmitter(s)
17. fencing
18. tree and shrubs

Now, you see the illusion some people are experiencing believing that they can remove for instance ceiling fans or blinds, it is wrong to do so, unless it is specified as "Excluded Item".

Everything can be requested by the Buyer to Stay, and if Seller agrees to do so, the list of new included items should be added to the contract and under Separate Bill of Sale with warranties as to title.

What if advertising (including MLS) items to stay are different from Purchase Agreement?

The REPC (Real Estate Purchase Contract) will most likely be found to be controlling document.

Gradual Price adjustment is not so bad...

Yale Professor Robert Shiller, whose Case-Shiller 20-city home price index has become an industry standard, says people shouldn’t fear gradually (the key word here) falling home prices.

"There's nothing troubling about a gradual correction of home prices. If we keep our incomes at the current level and home prices go down we are richer, we can buy more housing," Shiller says.

But if home prices fall suddenly, Shiller says that could undermine housing as well as consumer confidence and the economy.

There has been a misperception that houses will constantly appreciate, Shiller says. "Sometimes people will try to imagine that we can have both high home prices and affordable housing. But I can tell you that doesn't add up," he says."You either have high home prices or lower home prices.

And lower home prices are what we want, and people shouldn't be afraid of that," Shiller says. "Most of us care about our children and grandchildren, and these people have to buy houses so why would we want high home prices? We want economic growth, we don't want high home prices."

Call me if you are interested how much your home is worth now. Marina (your Local Realtor) 801-649-5883 or marinav30@yahoo.com