Pending sales up, but $8,000 tax credit won't last forever
The index shows the fifth consecutive monthly increase, a streak we haven't seen in nearly six years.
Looks like we're on a roll. Sales of existing and new homes are on the rise, and it appears that trend will continue if the National Association of Realtors' report that pending home sales also are increasing turns into a similar rise for completed sales.
From May to June, the pending home sales index rose 3.6% to 94.5 from an upwardly revised reading of 91.3 in May. And it's 6.7% higher than in June 2008, when it was 88.7.
To round out the good news, this is the fifth consecutive month the index has risen, and that hasn't happened since July 2003. So where's the but?
Well, it all sounds fine and dandy, but the housing industry does have a few factors working in its favor that may not last forever. The number of foreclosures on the market has helped drive down the prices of both new and existing homes. But now that home prices are rising again, fueling forecasts that the market is near or already has hit bottom, many potential homeowners are rushing to buy in the hopes that the time is finally ripe.
Add to that the point made in the WSJ.com Developments blog that the spring selling season could be helping increase sales, and more importantly, the clock is ticking for first-time homebuyers who want to take advantage of the $8,000 tax credit. The Realtors' chief economist Lawrence Yun offers this sage advice:
“Because it may take as long as two months to close on a home after signing a contract, first-time buyers must act fairly soon to take advantage of the $8,000 tax credit because they must close on the sale by November 30.”
I can't help but wonder whether the end of this tax credit may have an impact on the number of home sales in the near future. If I failed to close on a home before this deadline, I would be tempted to wait around for another similar offer before jumping on the homebuyer bandwagon.
On the other side, the Realtors are hopeful that recent clarifications from Fannie Mae and Freddie Mac about the new code of conduct for home appraisals will actually help more of these pending sales go through. Of course, the group still is pushing for moratorium on the new rules, which require appraisal-management companies to pick an appraiser to try to keep the pressure off of them to inflate values so deals go through.
Well, I suppose we have awhile to wait before we can be sure whether this upswing is a fluke or a trend. I'm crossing my fingers for the latter.
About Mai Ling Slaughter
Mai Ling Slaughter is a veteran journalist based in Seattle who has worked around the Northwest and abroad. She keeps a close eye on multimillion-dollar real-estate follies as a distraction from her own home's falling value.
