Jun 4

Pending home sales tracks the number of signed contracts. A signed contract is the beginning of the final steps of buying you new home. It generally takes a month or two to get to closing and ownership. The National Association of Realtors, or NAR, existing home sales tracks the number of actual closing.

 

real estate

Americans signing contracts last month to buy homes increased 6.7%, the largest increase in seven years. That is really good news for the economy and you too if you have bought a home recently. Let me explain. As the economy improves and people spend more money, the US bond yields will rise as investors look for other more profitable places for their money. This will drive up interest rates, as is already happening.

The 33% of those contracts were signed in the North and North east part of the country while

the Midwest carried 9.8%. The Midwest had an increase of 1.8% and the South fell, again, .2%.

Right now the foreclosure market and tax incentives are helping home sales. As the momentum increases, builders and sellers will start to take advantage of simple supply and demand laws. Supply decreases, demand increases and prices rise. This could take several months, even a year, or it could start tomorrow. No one knows for sure.

The previous pending home sales figures from last month was 3.2%. Analysts had predicted an increase of .4%. The actual number blew the predictions away. This could just be an influx of first time buyers taking advantage of the revised $8000 tax credit, or it could be from an improvement in consumer confidence and people not willing to take the chance and wait for further decreases in price. Again, no one knows for sure.

Ken Mayland of Clear view economics says”The market is crawling back and maybe the turn is here.” He added that the foreclosures moving through thought the market is a sign of impending recovery.Certainly the more home sales improve the better chance the economy in general has of a full recovery.On the other hand other economists such as Sal Guatieri of BMO Capital are not so optimistic. He laments”there are to many headwinds for home buyers. Tight credit, mounting job losses and fears of further price declines. The housing market is showing no signs of a bottom.” The very nature of the disagreement among analysts and economist suggest some sort of equilibrium.

Coldwell Banker has sent lobbyists to Washington to ask the Government for a $15,000 tax credit for all home buyers, not just the first timers. This would take an enormous amount of capital and with the deficit already so large it would take a lot of convincing. Remember the more money that is puty out into the economy the more interest rates are likely to rise.

It’s ultimately your decision to either wait the market out and hope rates drop and prices remain low or to get in your new home before inflation comes and prices rise. One thing is for sure, the market will recover it’s just a guessing game as to when.