Tuesday, June 2, 2009

Falling sales and prices have brought home affordability to new highs.

TO BE NOTED: From the FT:

US pending home sales surge in April

By Alan Rappeport in New York

Published: June 2 2009 15:03 | Last updated: June 2 2009 15:03

The US housing market showed another sign that the free-fall could be slowing on Tuesday as figures showed that pending home sales rose for the third month running in April as record low mortgage rates are luring buyers back to the market.

The data, released by the National Association of Realtors, which reflect deals that have been signed but not completed, showed that pending home sales rose by 6.7 per cent during the month and were up by 3.2 per cent on the year. Economists were expecting a monthly rise of 0.5 per cent.

Sales jumped the most in the northeast, rising by 32.6 per cent between March and April. Pending home sales rose by 9.8 per cent and 1.8 per cent in the midwest and west, respectively. In the south, sales were off by 0.2 per cent in the month but were still up by 3.5 per cent compared with April 2008.

“Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market,” said Lawrence Yun, NAR chief economist.

Homeowners have been reluctant to sell their homes amid falling prices, while buyers have been awaiting the full impact of new government incentives to take effect and have been wary of investing in a declining asset class.

But a batch of recent housing market indicators show that parts of the housing market – particularly the low end of the price spectrum – are starting to unlock.

“The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline,” Mr Yun said.

Falling sales and prices have brought home affordability to new highs. According to the NAR housing affordability index, buying conditions in April reached the second highest level since it began tracking home sales in 1970.

The results on Tuesday follow NAR figures last week showing that home resales rose by 2.9 per cent in April to an annual rate of 4.68m. The monthly rise was due to distressed sales and foreclosures, which accounted for 45 per cent of all transactions.

Meanwhile on Monday, commerce department figures showed that US construction spending unexpectedly rose in April, with residential construction climbing by 0.7 per cent.

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