Homebuyers Sign on the Line
Swarms of home-buyers signed contracts in October - the pending home sales index climbed for its ninth straight month and is now close to its highest level ever.
So what gives? Aren't we in a housing recession?
The index for October hit 114.1 - that's just a hair less than its peak of 115.2 in March 2006, at the height of the housing boom. Just a year ago, while the financial markets collapsed, the index struggled at 86.6.
No, the housing crisis isn't over. The number crunchers at the National Association of Realtors (NAR) credit the boom in contracts to stimulus from the federal home buyer tax credit, which was originally set to expire in November before Congress extended it. Home buyers rushed to sign their contracts before the tax break vanished.
But the tax credit doesn't account for all the good news - low prices that match what home buyers are willing and able to pay also play a role. Experts and economists had already figured the expiring tax credit into their calculations when they predicted pending sales would fall in October. The median projection of 37 gathered by Bloomberg News called for a 1 percent drop from September, instead of the 3.7 percent increase announced today.
What's a pending home sale?
Every month NAR counts up the contracts signed by people planning to buy homes and converts that number into an index. It's a great way to show the direction the housing market is going, because those pending home sales will turn into closed sales unless home buyers break their contracts. An index value of 100 represents the average level of contracts signed in 2001 - that was the first year for the index and a pretty good year for the housing market.