Pending Home Sales Index, a leading indicator of housing activity which measures housing contract for existing single-family homes, condos and co-ops, came in April much better than expected, at +6.3% versus -0.4% expectation to 88.2 from a reading of 83.0 in March. This is the highest index since last October.
According to NAR’s (The National Association of Realtors) Chief Economist Lawrence Yun – bargain hunters have entered the market en masse, especially in areas that have experienced double-digit price declines. Sharp price reductions are leading to a quicker discovery of price equilibrium points. As a result, the West is already seeing year-over-year gains in pending contracts.
The April Index in the West climbed 8.3 percent from March to 98.8 and is 4.0 percent higher than April 2007. In the Midwest, the index jumped 13.0 percent to 83.7 in April but remains 13.1 percent below a year ago. The South posted a 4.6 percent gain to 88.8, while the Northeast index declined 1.9% to 79.3%.
The NAR forecasts the median price of an existing home to drop 8.4 pct in the first half of fiscal ’08, then stabilize to subsequently post a 4.4 percent gain during fiscal ’09. In 2009, the median price of an existing home will rise to $213,900.
New-home sales will probably fall 31.7 percent to 529,000 in 2008 before rising 12.5 percent to 595,000 in 2009. Housing starts, including multifamily units, are projected to drop 27.2 percent to 987,000 this year, and then slip 0.6 percent to 980,000 next year.
Existing home sales this year are expected to total 5.40 million and then increase to 5.74 million in 2009.
NAR also expects interest rates on 30-year fixed rate mortgages to rise to 6.3 percent by the end of this year, then hold at that level for most of 2009.