Pending home sales have leveled from a market swing driven by response to the home buyer tax credit, according to the National Association of Realtors (NAR).
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in December 2009, increased 1% to 96.6 from 95.6 in November 2009, and remains 10.9% above December 2008 when it was 87.1. In November 2009, the monthly index had fallen by 16.4% from surging activity in preceding months.
Lawrence Yun, NAR's chief economist, notes the importance of recognizing how the tax credit is skewing market data.
"There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded," he says. "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."
Buyers who have a contract in place to purchase a primary residence by April 30, 2010, have until June 30, 2010, to finalize the transaction to qualify for a tax credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
The PHSI in the Northeast rose 2.3% to 76.1 in December 2009. In the Midwest, the index increased 5.2% to 86.9. Pending home sales in the South rose 2.2% to an index of 98.4, and in the West, pending home sales fell 3.8% to 119.9.
Yun projects the extended and expanded tax credit will encourage 2.4 million households to take the credit in 2010.
"While new-home sales will remain low due to a lack of construction, existing-home sales are projected to rise to around 5.6 million in 2010," Yun adds. Last year, there were 5.16 million existing-home sales.
SOURCE: National Association of Realtors