A now-established trend remained consistent in January, as pending home sales declined, yet again, on the heels of a weakening economy and as some buyers waited for clarity on housing stimulus provisions, said the National Association of Realtors Tuesday. NAR’s Pending Home Sales Index, a forward-looking indicator based on contracts signed in January, fell 7.7 percent to 80.4 from a downwardly revised reading of 87.1 in December, said the Association. That is 6.4 percent below January 2008 when the index read 85.9. Currently, the index is at its lowest level since tracking began in 2001, when the index value was set at 100. “Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales,” said Lawrence Yun, NAR chief economist. “We expect similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions and from the $8,000 first-time buyer tax credit.” The PHSI in the Northeast dropped 12.7 percent to 57.8 in January and is 19.7 percent below a year ago. In the Midwest the index declined 9.2 percent to 72.6 — 13.8 percent below January 2008. The index in the South fell 11.9 percent to 82.2, while the index in the West rose 2.4 percent to 103.6, up 13.5 percent from January 2008. Despite an overall weak housing market, affordability conditions have actually improved dramatically, explained NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “Housing affordability is at a record high – the buying power of a typical family has risen significantly,” he said. “With the drop in interest rates, a median-income family can afford a home costing $20,000 more than a year ago for the same monthly mortgage payment. With the strong housing stimulus, we are hopeful inventory will get trimmed and help prices to stabilize in many areas by the end of this year.” NAR’s Housing Affordability Index rose 13.6 percentage points in January to 166.8, a new record high. The HAI, a broad index of affordability using consistent values and assumptions over time, shows that the relationship between home prices, mortgage interest rates and family income is oddly the most favorable since tracking began in 1970. NAR said the HAI indicates a median-income family, earning $59,800, could afford a home costing $283,400 in January with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest; affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of that amount. A year ago, the typical family could afford a home costing $263,300. Write to Kelly Curran at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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