More homebuyers signed purchase contracts in July than the month before, according to a report by the National Association of Realtors. An index that tracks pending home sales nationwide rose 5.2 percent in July, to 79.4, after hitting a downwardly revised 75.5 in June. May and June both marked record lows following the expiration of the federal homebuyer tax credits.
The index tracks signed, but not closed, purchase contracts for resale homes. An index of 100 indicates the average contract activity in the index’s 2001 base year, which was a record year for existing-home sales.
Significantly, July’s Pending Home Sales Index remained down 19.1 percent compared to July 2009. New-home and existing-home sales both tumbled considerably month-to-month and year-over-year in July.
"Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery," said Lawrence Yun, NAR’s chief economist, in a statement. "But the recovery looks to be a long process. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity."
Yun added, "Affordability could reach a generational high in the second half of this year because of rock-bottom mortgage interest rates."
The West saw the biggest month-to-month index rise (11.6 percent to 95), but a year-over-year decline of 17.6 percent. The index rose 6.3 percent month-to-month to 62.5 in the Northeast. Year-over-year, the region saw a 21.1 percent drop.
The Midwest saw a 4.1 percent index rise from June to 66.7. The region saw the biggest year-over-year decline: 25.7 percent. The South saw the most modest activity of the month, posting the smallest month-to-month index rise (1.2 percent to 86.3) and the smallest year-over-year drop: 15.6 percent.
In its latest economic outlook, also released today, NAR forecasts that the nation’s unemployment rate will average 9.8 this year, dip slightly to 9.7 percent in 2011, and then fall to 9.2 percent in 2012.
As it has for the past several months, the association revised its interest-rate projections for 30-year fixed-rate mortgages downward. September’s outlook expects them to average out at 4.7 percent for 2010, 5.1 percent for 2011, and 5.9 percent for 2012.
NAR reigned in its expectations for existing-home sales in 2010. It now projects a 4.8 percent drop in sales compared to 2009, as opposed to the 0.5 percent drop expected in an earlier forecast released last month. Projections for 2011 and 2012 were a bit rosier, however, with sales expected to jump 10.7 percent in 2011 and 1.1 percent in 2012.
The association downwardly revised its new-home sale projections for both 2010 and 2011. Instead of a 9.1 percent increase in new-home sales this year, forecast in its previous report last month, NAR now expects those sales to decrease 11.8 percent.
In 2011, it expects sales to ramp up 35.3 percent, down from the 44.8 percent jump expected in last month’s forecast. In 2012, NAR expects new-home sales to rise 29 percent from the year before.
Housing starts this year are expected to increase 12.8 percent — down from a 24.3 percent August forecast. Instead of rising 42.1 percent in 2011, as earlier forecast, starts are expected to rise 28.1 percent, NAR projected.
The association’s forecast for median home prices is roughly flat in 2010: $172,700 — a 0.1 percent increase from 2009. The association expects the median price of resale homes to rise 0.9 percent in 2011 and 2.1 percent in 2012.
For new homes, the forecast for 2010 dropped is for a 0.6 percent decline compared to the previous year, to $214,600 (NAR’s earlier forecast anticipated a 1.2 percent decrease). The association expects a median-price increase of 2.4 percent in 2011 and 5.1 percent in 2012 — slightly below the rises anticipated in the previous forecast.
The association raised its Housing Affordability Index forecast from the earlier forecast released last month, to 178 in 2010, 166 in 2011 and 138 in 2012. An index of 100 means that a family earning the nation’s median income has exactly enough income to qualify for a mortgage loan on a median-priced home with a 20 percent downpayment. An index over 100 means a family has more than enough income to qualify.
