Pending home sales fell in November, following a surge at the time of the federal homebuyer tax credit’s original deadline, but were still up year-over-year, the National Association of Realtors reported Tuesday.
The Pending Home Sales Index dropped 16 percent to 96 from an upwardly revised 114.3 in October, but is 15.5 percent higher than November 2008, when it was 83.1, according to NAR. The index is based on a large national sample of home sales in which a contract has been signed but the transaction has not yet closed.
Sales are usually finalized within one or two months of signing and the index is therefore a good indicator of sales performance, NAR said. An index of 100 is equal to average contract activity in 2001, the index’s first year.
The decline was expected, NAR said.
"It will be at least early spring before we see notable gains in sales activity as homebuyers respond to the recently extended and expanded tax credit," said Lawrence Yun, NAR’s chief economist. "The fact that pending home sales are comfortably above year-ago levels shows the market has gained sufficient momentum on its own. We expect another surge in the spring as more homebuyers take advantage of affordable housing conditions before the tax credit expires."
The homebuyer tax credit was originally set to expire at the end of November. Buyers now have until April 30 to sign a contract on a home, and until June 30 to close the transaction in order to receive a tax credit of up to $8,000 for first-time homebuyers and $6,500 for current homeowners. Yun projects an additional 900,000 first-time buyers and 1.5 million repeat buyers will qualify for the extended tax credit. About 2 million first-time buyers have already purchased under the credit program, he said.
The biggest month-to-month drops in pending home sales were in the Northeast and the Midwest, where the index dropped 25.7 percent in each region. Each also saw year-over-year gains, however, of 14.7 percent in the former and 9.2 percent in the latter.
In the South, the index fell 15 percent to 97.8 in November compared to the previous month, but was 14.7 percent higher year-over-year. The West saw a smaller monthly decline of 2.7 percent to 124.6, but also saw the biggest percentage increase, 21.4 percent above the November 2008 level.
Interest rates are likely to increase in 2010, Yun said, but he expects the tax credit and job growth to encourage homebuying activity and reduce inventory. As a result, he expects home prices to stabilize or even rise somewhat this year.
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