Pending home sales (contracts signed) dipped far below what was forecast in April, hitting a seven month low, according to the National Association of Realtors (NAR), now 27% below April of 2010.
Last month when pending home sales beat expectations, NAR Chief Economist Lawrence Yun spoke optimistically about market conditions, “Based on the current uptrend with very favorable affordability conditions, rising apartment rents and ongoing job creation, existing-home sales should rise around 5 to 10 percent this year with sales growth of lower priced homes likely to outperform high-end homes.”
The Pending Home Sales Index dropped 11.6% between March and April, analysts are pointing to a hike in gas and food prices along with trending bad weather and natural disasters, and an unexpected spike in unemployment claims, all of which have hampered consumers’ perception of buying.
With this news, Yun said, “The pullback in contract signings is disappointing and implies a slower than expected market recovery in upcoming months.”
Yun said tight credit is the primary long-term factor holding back the market. “No doubt the continuing excessively tight mortgage underwriting process is making the housing market recovery unnecessarily slow. Lenders and bank regulators need to be mindful of the historically low default rates among mortgage borrowers of the past two years. A robust economic and housing market recovery cannot occur as long as banks continue to hold onto huge cash reserves.”
So what is Yun’s answer? “We simply have to get back to sound, common-sense lending standards to provide mortgages to creditworthy borrowers who are buying homes well within their means. Bank balance sheets show rising cash reserves and declining loan balances – it’s time to loosen the purse strings.”
All real estate is local
While it is important to know national statistics to be well informed as a Realtor and be able to compare the strengths and weaknesses in your market with other markets, it is always true that all real estate is hyperlocal.
Pending home sales in the South dropped 17% in light of the high number of tornadoes ripping across the region, with similar drops in the West of 9% and the Midwest of 10%, leaving the Northwest as the only region to experience an increase in contract volume with a 1.7% increase.