Pending home sales rise, housing expected to do better 2nd half of 2008
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It seems like the housing market is finally seeing some signs of a recovery and this may be early indications that the housing downturn is bottoming out.
The National Association of Realtors (NAR) reported Pending Home Sales Index (PHSI) numbers for the month of June. Based on prospective homeowners signing contracts in April, the index rose 6.3 percent to 88.2 from a reading of 83.0 in March. This is the highest index since last October, but remains 13.1 percent lower than April 2007 when it stood at 101.5.
With the recent rate cuts by the federal reserve, banks can now borrow money from each other at lower interest rate making more money available for lending purposes. The NAR forecasts that the PHSI has seen an increase and will show better performance for the second half of the year due to more affordable loans in the market.
“Although mortgage interest rates will remain historically favorable, they will start to steadily inch up,” said Lawrence Yun, NAR chief economist. The 30-year fixed-rate mortgage should rise gradually to 6.3 percent by the end of this year, and then hold at that level for most of 2009.
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 but remains 13.1 percent below a year ago. The index in the South increased 4.6 percent to 88.8 but is 22.5 percent below April 2007. In the Northeast, the index declined 1.9 percent in April to 79.3 and is 12.2 percent below a year ago.
The US market has seen a slowdown in 2008 with many economists declaring a recession. Several factors: crash in the housing market, the credit crisis, reduced consumer spending, a falling dollar and rising commodity prices have contributed to a slowing economy.
An improvement in the housing market may be the begining of a turnaround in the recent troubles for the US economy and consumers.
