Pending Home Sales Rise Unexpectedly; Foreclosure Effect?
A widely-watched measure of future home sales activity jumped 6.3 percent in April, an unexpected result for a housing market that many believe is still in the throes of a long-term correction. The National Association of Realtors' pending home sales index rose to 88.2 in April from a reading of 83.0 in March, the trade group reported Monday morning — it’s highest level since last October, although still 13.1 percent below year-ago levels. The April numbers handily beat market expectations. Economists had expected the index to register 83.0 for the month, according to a survey of Wall Street economic experts by Thomson/IFR, the Associated Press reported. The NAR’s chief economist, Lawrence Yun, wasted no time in touting the numbers as evidence that buyers were back — and in droves, too. "Bargain hunters have entered the market en masse, especially in areas that have experienced double-digit price declines, but it’s unclear if they are investors or owner-occupants," he said in a press statement. It’s also unclear if the purchases represent an influx of foreclosed properties; numerous sources have suggested in recent weeks that "distressed asset" sales have begun to comprise a not-insignificant portion of sales activity in some of the nation’s most troubled housing markets. Earlier this month, HW reported on how REO listings are skewing both transaction counts and sales prices in key housing markets. Data providers, including DataQuick Information Systems, Radar Logic, and ForeclosureRadar have all reported on the so called "foreclosure effect." Evidence of the effect of foreclosures comes from a regional breakdown of the pending sales activity, as well. Contracts for pending sales in the West region of the U.S. jumped sharply in April, up 8.3 percent to 98.98 in April — a 4 percent gain from year-ago levels. Other regions posted increases as well, although only the West posted a year-over-year gain in pending sales contracts. Yun continued to suggest that legislators needed to pass bills that would stimulate what the realtor-led group sees as "pent-up demand." "Home sales are at about the same level as they were 10 years ago, yet the population has grown by 25 million people and we have over 10 million more jobs," he said. "The housing market has been underperforming by historical standards, partly because buyers were hampered by mortgage availability issues, but that’s improved and an upturn is more likely." Something tells us that it’s actually the other way around: making mortgages "more available" is what got us into this mess to begin with. With that in mind, loosening underwriting standards doesn’t seem like the wisest way to back a recovery in housing, does it? For more information, visit http://www.realtor.org.