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The number of previously owned homes placed under sales contract surged 8.2% in February, according to data released Monday, the first sign that the government's extended tax credit for buyers may bolster sales this spring.

The National Assn. of Realtors said Monday that its pending home sales index, a forward-looking measure based on contracts signed, rose to 97.6 in February from a downwardly revised 90.2 in January. That was 17.3% above February 2009, when the index was at 83.2.

A reading of 100 is equivalent to the amount of activity hit during 2001, when home prices began their record climb and when the data were first measured.

"I don't expect a vigorous market resurgence or a sharp, new rise in home prices," said Michael D. Larson, a housing and interest rate analyst with Weiss Research.

"Foreclosure inventory will continue to be doled out into the market over the next year or two, taking some vigor out of this recovery," Larson said. "But it will be a recovery nonetheless, one warmly welcomed by battered home sellers, banks and home builders."

The Midwest notched the biggest increase, rising 21.8%. Pending sales climbed 9.2% in the South and 9% in the Northeast, but fell nearly 4.8% in the West.

Sales nationally have plummeted for three consecutive months beginning in December after surging last fall as buyers rushed to take advantage of the government's credit for first-time purchases before its initial November expiration.

Congress extended that incentive of as much as $8,000 for first-time borrowers through the end of April and expanded it to include as much as $6,500 for some current homeowners.

Contracts signed typically lead to closings in one or two months, although distressed sales such as foreclosure sales and short sales often can take longer.
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By Dawn Wotapka

Today’s data from the National Association of Realtors sure makes it seem like housing has hit the much-awaited bottom: Pending-home sales showed a surprising gain of 8.2% in February, as buyers responded to improved weather and the federal home-buyer tax credit.

Sales of homes entered into contract jumped by the largest margin in more than eight years, Weiss Research notes, with broad-based regional strength.

The excitement is understandable. Housing has been so bad for so long that it’s easy to get giddy over a great statistic. But, while this is good news, proceed with caution.

Much of the bump comes from the federal tax credit, which expires at the end of the month. “Cheap homes and cheap financing are gradually bringing out buyers,” Mike Larson, real estate and interest rate analyst at Weiss Research, wrote in a client note.

While there might be strong data in future weeks, industry experts have long said that softness could follow once the incentive - essentially free money - to buy is taken away. (Few expect the credit to be extended.)  “Activity likely picked up further in March, and we expect buyers to act with even more urgency in April, although this brief surge will likely be followed by a lull in activity similar to the drop-off in late fall/winter,” noted Credit Suisse builder analyst Dan Oppenheim.


And, we’ve warned about other headwinds: Foreclosures remain a stubborn issue that drag down neighborhood values. The amount of shadow inventory, homes that haven’t made it to the market, remains anyone’s guess. Lenders remain strict, making buyers jump through hoops to secure a mortgage. This all comes as the Fed has stopped buying up mortgages, which some fear could result in higher interest rates that cut into affordability.

“I don’t expect a vigorous market resurgence or a sharp, new rise in home prices. Foreclosure inventory will continue to be doled out into the market over the next year or two, taking some vigor out of this recovery,” Mr. Larson said. “But it will be a recovery nonetheless, one warmly welcomed by battered home sellers, banks, and home builders.”

Indeed, investors in home builders look to be giddy Monday: Standard Pacific is up 6.03%, while Beazer has gained 4.38%.  No major public builder is in negative territory.

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By Nick TimiraosHave government policies staved off a future home price decline, or have they simply kicked a future price decline further down the road?

It’s a timely question with Tuesday’s report on January home prices from the Case-Shiller home price index, which showed slightly better than expected home price appreciation. After adjusting for seasonal factors, home prices gained by 0.3% in the three month period ending in January 2010 versus the three month period ending in December 2009. Price gains were led by Western markets such as Los Angeles and San Diego that have seen lots of activity at the low-end as first-time buyers compete with investors for deals on distressed sales.

To recap, the government took a series of aggressive steps to help prop up the housing market last year:

  • Congress extended and expanded the home buyer tax for contracts signed by April 30 and closed by June 30.
  • The Federal Reserve extended its purchases of mortgage-backed securities to help keep mortgage rates low. Those purchases are set to end on Wednesday.
  • The Federal Housing Administration has helped provide a steady source of mortgages with minimum down payments of 3.5%. Insurance premiums will rise on FHA-backed loans beginning next week.
  • The government has pushed banks to do more to modify loans, which has held back the number of new foreclosures hitting the market. Foreclosure activity should pick up as more borrowers fail to qualify for modifications and as new programs go into place next week to accelerate short sales, where homes sell for less than the amount owed.
Standard & Poor’s, which publishes the Case-Shiller index, warns that the rebound in home prices from last fall is “fading.” There was always a big concern that home prices would slide after the tax credit expired, and while it was extended, the threat of expiration produced a big flurry in buying activity last fall.

While home price indexes that include distressed sales, such as the Case-Shiller index, hit their bottom last year, says Thomas Lawler, an independent housing economist based in Leesburg, Va. But he says there’s still reason to worry about a “risk of renewed downturn” after the home buyer tax credit expires and if the economy doesn’t improve. “The bottom’s been reached but for many people it won’t feel like a bottom,” he says.

The stream of buyers generated by the extension of the tax credit “has been less robust than expected,” says a monthly report from John Burns Real Estate Consulting. While analysts are “cautiously optimistic” forecasts for housing starts may have to be revised down in the coming weeks if sales don’t pick up.

The high-end of the housing market is still weak with more signs of distress, as sellers wake up to the fact that the luxury market won’t be able to dodge 30% price declines from the peak. And though the low end of the market has stabilized, “it isn’t picking up as quickly as we thought,” say the analysts.

Readers, do you think we’ve reached the bottom, or have we simply postponed it?

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Contracts for pending sales of previously owned homes unexpectedly rose in February, a survey from the National Association of Realtors showed, a rise the group said may be attributed to home buyers taking advantage of a soon-to-expire tax credit.

The Realtors said its Pending Home Sales Index, based on contracts signed in February, rose 8.2 percent to 97.6 from a downwardly revised 90.2 in January.

Analysts polled by Reuters had forecast pending home sales, which lead existing home sales by one to two months, would remain essentially unchanged in February.

“Anecdotally, we’re hearing about a rise of activity in recent weeks with ongoing reports of multiple offers in more markets, so the March data could demonstrate additional improvement from buyers responding to the tax credit,” said Lawrence Yun, NAR chief economist.

First-time home buyers who sign a contract before the end of April, and close the transaction before the end of June, are eligible to receive $8,000 from the government.

Buyers who are selling a home and buying a new home are eligible for $6,500.

“The housing recovery is weaker in magnitude compared with other recoveries, but it is still recovering,” said Kurt Karl, chief U.S. economist at Swiss Re in New York.

The index is 17.3 percent higher than February 2009.

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RISMEDIA, March 30, 2010—Home sales decreased 11.7% in February 2010 in California compared with the same period a year ago, while the median price of an existing home rose 14.1%, the California Association of Realtors® (C.A.R.) recently reported.

“The federal tax credit for home buyers, low mortgage rates, and affordability at record levels have contributed to an unprecedented opportunity for many first-timers in the market for a home of their own,” said C.A.R. President Steve Goddard. “Although sales have declined from the unusually strong levels we experienced a year ago, they’ve remained above the 500,000 unit threshold for 18 consecutive months, while home prices continue to firm in the regions of the state most attractive to buyers taking advantage of today’s favorable market conditions.”

Closed escrow sales of existing, single-family detached homes in California totaled 528,930 in February at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local Realtor associations statewide. Statewide home resale activity decreased 11.7% from the revised 598,770 sales pace recorded in February 2009. Sales in February 2010 decreased 2.2% compared with the previous month.

The statewide sales figure represents what the total number of homes sold during 2010 would be if sales maintained the February pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales. The median price of an existing, single-family detached home in California during February 2010 was $279,840, a 14.1% increase from the revised $245,230 median for February 2009, C.A.R. reported. The February 2010 median price decreased 2.4% compared with January’s $286,600 median price.

“Sales of distressed properties to investors and first-time buyers continued to drive the market in February, although at a lesser rate than a year ago,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Supply continues to lag demand at the more affordable end of the market, with a 3.9 month supply of homes for sale priced below $300,000, compared with the long-run average of more than seven months. This contrasts sharply with the nearly 15-month supply of homes for sale priced at $1 million or more at the upper end of the market.”

Highlights of C.A.R.’s resale housing figures for February 2010:

-C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in February 2010 was 6.3 months, compared with 7.1 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

-Thirty-year fixed-mortgage interest rates averaged 4.99% during February 2010, compared with 5.13% in February 2009, according to Freddie Mac. Adjustable-mortgage interest rates averaged 4.23% in February 2010, compared with 4.87% in February 2009.

-The median number of days it took to sell a single-family home was 41.2 days in February 2010, compared with 51.4 days (revised) for the same period a year ago.

-Statewide, the 10 cities with the highest median home prices in California during February 2010 were: Newport Beach, $1,000,000; Santa Monica, $781,250; Danville, $755,000; Santa Barbara, $725,000; San Clemente, $685,000; Pleasanton, $650,000; Mountain View, $637,500; San Francisco, $637,441; Redondo Beach, $615,000; and Sunnyvale, $609,500.

-Statewide, the cities with the greatest median home price increases in February 2010 compared with the same period a year ago were: Banning, 44.4%; Richmond, 38.9%; La Habra, 35.9%; Rancho Mirage, 33%; Vista, 29.3%; National City, 29%; Oakland, 29%; El Cajon, 28.1%; San Pablo, 26.3%; Fremont, 26%; and Pittsburg, 25.8%.

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