Pending home sales in December showed signs of recovering from a slump the month before, according to a report by the National Association of Realtors released Tuesday.
The association also adjusted its economic outlook for 2010 and 2011, and projects that existing-home sales will rise from 5.19 million in 2009 to 5.66 million in 2010 and 5.7 million in 2011.
Based on contracts homebuyers signed but not yet closed in December, the association’s Pending Home Sales Index increased 1 percent, to 96.6 from 95.6 in November, and rose 10.9 percent from December 2008, when the index was 87.1.
The index is based on about 20 percent of transactions for existing-home sales nationwide. An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined and the first of five consecutive record years for existing-home sales, the association said.
After a spike in activity the association attributed to a rush to meet the original deadline for the homebuyer’s tax credit, November’s index fell 16.4 percent compared to October, though it remained 15.5 percent higher than in November 2008.
Homebuyers must now sign a contract on a home by April 30 and close the transaction by June 30 to qualify for the tax credit, which is up to $8,000 for first-time homebuyers and up to $6,500 for repeat buyers.
"There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded," said Lawrence Yun, the association’s chief economist. Yun projects 2.4 million households will take advantage of the credit in 2010.
"These swings are masking the underlying trend, which is a broad improvement over year-ago levels. December activity was the fifth-highest monthly tally in two years."
Regionally, the West saw the only month-to-month index drop, to 119.9 from 124.6 in November, a 3.8 percent difference. Nevertheless, the region held the highest year-over-year increase, 18.6 percent, up from 101.1.
In the Northeast, the index rose 2.3 percent month-to-month, to 76.1, from 74.4, and 14.9 percent year-over-year, from 66.2. The Midwest saw a 5.2 percent month-to-month increase, to 86.9, from 82.6, and an 8.7 percent year-over-year increase, from 80.
The South saw the smallest month-to-month increase, 2.2 percent to 98.4 from 96.3, and the smallest year-over-year increase, 5.5 percent, from 93.3. …CONTINUED
The overall index for pending homes sales in 2009 was 95.1, compared with 87.1 in 2008 and 96.3 in 2007.
In its latest market forecast, the association expects new single-family home sales will rise from 375,000 in 2009 to 446,000 in 2010 and 637,000 in 2011, surpassing 2008’s sales of 485,000 new single-family homes.
The association expects prices to rise both this year and in 2011. It projects a 3.4 percent price increase for existing homes, to a median home price of $179,800 in 2010, and a 4.3 percent increase in 2011 to $187,500. Prices should rise even more for new homes, with a 3.7 percent increase this year to a median price of $221,300, and a 4.7 percent increase in 2011, to $231,700.
Rising sales will stabilize home prices, according to Yun.
"For several months now we’ve been seeing stabilization in all of the home-price measures as inventory is pulled down," Yun said. "As a result, the housing wealth for many middle-class families has begun to stabilize."
Percentage-wise, the association expects existing home sales in 2010 will rise 9 percent and slow down considerably in 2011, to a 0.6 percent increase. Existing-home sales make up the vast majority of home sales.
The association projects new single-family homes sales will rise rapidly: up 18.8 percent in 2010 and up 42.9 percent in 2011. Residential construction should gear up 27 percent in 2011 after a slim 3.2 percent increase in 2010, the report said.
Housing starts will increase a whopping 60.6 percent in 2011, after a 21 percent increase in 2010, the report said. That projected surge amounts to 1.07 million starts in 2011, well below the record high 2.07 million the U.S. Census bureau documented in 2005.
The association’s Housing Affordability Index will decline from 170 in 2009 to 151 in 2010 and 129 in 2011. A value of 100 means that a family making the nation’s median income has exactly enough income to qualify for a mortgage on a median-priced home, according to the association.The higher the index, the more affordable such a house is for a family.
The association expects 30-year fixed rate mortgages will rise from 5.1 percent in 2009 to 5.5 percent in 2010 and 6.2 percent in 2011. That would be the highest level since 6.1 percent in 2008.
At the same time, the association projects that unemployment will remain at a steady 10 percent this year and decline to 9.7 percent next year. U.S. gross domestic product will grow 3.2 percent, real disposable income will grow 3.4 percent, and consumer confidence will rise from 45 last year to 57 this year and 65 next year, the report said.
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