RTTNews - With homebuyers responding to very favorable market conditions, including record low mortgage interest rates, a report released by the National Association of Realtors on Tuesday showed that pending home sales increased by much more than expected in the month of April.
The report showed that the pending home sales index rose 6.7 percent to 90.3 in April from a reading of 84.6 in March. Economists had been expecting a much more modest increase by the index of about 0.5 percent.
A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
Lawrence Yun, NAR chief economist, said, Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market.
Since first-time buyers must finalize their purchase by November 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers, he added.
The bigger than expected increase in pending home sales was partly due a substantial increase in pending home sales in the Northeast, which jumped 32.6 percent.
Pending home sales in the Midwest also showed a notable 9.8 percent increase, while pending home sales in the West edged up 1.8 percent and pending home sales in the South fell 0.2 percent.
NAR also said its Housing Affordability Index rose to 174.8 in April from an upwardly revised 171.9 in March. With the increase, the index was at its second highest monthly reading on record after peaking at 176.9 in January.
Despite the much bigger than expected increase by the pending home sales index, Yun cautioned that the reporting sample for pending home sales is smaller than that of existing-home sales, so it is subject to greater variability.
In addition, the relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons, Yun said.
While NAR said the total number of existing-home sales is expected to improve, it noted that there will be dramatic local market variation in the timing of the recovery.
Last Wednesday, NAR released a report showing that existing home sales in the month of April increased by slightly more than economists had been expecting, with first-time buyers continuing to influence the housing market.
The report showed that existing home sales rose 2.9 percent to an annual rate of 4.68 million units in April from a downwardly revised rate of 4.55 million units in March. Despite the monthly increase, existing home sales were down 3.5 percent year-over-year.
Economists had expected sales to rise to a 4.66 million unit rate from the 4.57 million unit rate originally reported for the previous month.
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