Homebuyers Sign on the Line
The seasonally adjusted index of pending home sales was 96.6 in December, according to the National Association of Realtors. That's up about 1 percent from November, and the fifth highest monthly tally in two years.
It also beats the index performance for the whole first half of last year, as well as for 2008, when the index averaged 87.1, or 2007 when the index averaged 96.3.
However, the index is still much lower than it was during the mini-housing boom that ran from August through October as homebuyers rushed to take advantage of the federal homebuyer tax credit that was originally set to expire in November. The index peaked at 114.3 in October, only to crash back to 95.6 in November.
"There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded," said Lawrence Yun, chief economist for the Realtors. "These swings are masking the underlying trend, which is a broad improvement over year-ago levels."
Congress has extended the homebuyer tax credit. Buyers who have a contract in place to buy a primary residence by April 30 will have until June 30 to close the deal and qualify for a tax credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Yun expects another rush to buy homes this spring. "While new-home sales will remain low due to a lack of construction, existing-home sales are projected to rise to around 5.6 million in 2010," Yun said. Last year there were 5.16 million existing-home sales.
That should firm up home prices, according to Yun.
Other economists agree with Yun that the tax credit will push home sales this spring, though many also worry that foreclosures may offset the activity and drag prices back down. For example, the economists at Freddie Mac predict that the Case Shiller Home Price Index will fall 5 percent in the first quarter, with smaller quarterly losses for the rest of the year.
Pending Home Sales over the Last Year
December 2009 - 96.6
November 2009 - 95.6
October 2009 - 114.3
September 2009 - 110.0
August 2009 - 103.8
July 2009 - 97.6
June 2009 - 94.6
May 2009 - 91.3
April 2009 - 90.6
March 2009 - 84.6
February 2009 - 82.0
January 2009 - 80.4
December 2008 - 87.1
November 2008 - 83.1