A modest gain in the level of home sales occurred in the first half of the year and an improvement is forecast for the second half of this year as more buyers are able to access affordable mortgages, according to the latest forecast by the National Association of Realtors®.
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in April, rose 6.3 percent to 88.2 from a reading of 83.0 in March. It’s the highest index since last October.
The PHSI in the West rose 8.3 percent to 98.8 in April and is 4.0 percent higher than April 2007. In the Midwest, the index jumped 13.0 percent to 83.7 in April. The index in the South increased 4.6 percent to 88.8 and, in the Northeast, the index declined 1.9 percent in April to 79.3.
NAR President Richard F. Gaylord said the market may be breaking its holding pattern. "It appears that more buyers are realizing they can take advantage of a favorable combination of mortgage interest rates, home prices and family income," he said. "Overall affordability conditions are the best we’ve seen since the middle of the housing boom in 2004, but with far more choices and much less pressure than buyers experienced four years ago to make an investment in their future. Recent declines in mortgage rates on conforming jumbo loans and a return to sound but not overly stringent underwriting standards will permit more people to qualify for a loan."
NAR’s housing affordability index has been trending up this year and is projected to rise 15 percentage points to 128.0 for all of 2008.
Yun said the underlying fundamentals point to a pent-up demand. "Home sales are at about the same level as they were 10 years ago, yet the population has grown by 25 million people and we have over 10 million more jobs," he said. "The housing market has been underperforming by historical standards, partly because buyers were hampered by mortgage availability issues, but that’s improved and an upturn is more likely. On the other hand, it’s unclear what role consumer confidence will play in the coming months."
Existing-home sales should increase from an annual pace of 5.05 million in the second quarter to 5.83 million in the fourth quarter. For all of this year, existing-home sales are expected to total 5.40 million, and then rise 6.3 percent to 5.74 million in 2009. "Sales gains will be greatest in areas that underwent sharp price declines," Yun said.
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