Housing Market Continues to Show Signs of Recovery

Consumer Confidence at an 8 Month High

The Pending Home Sales Index climbed 2% in December, according to the National Association of REALTORS®. A “pending home sale” is an existing home under contract to sell, but not yet closed. It’s *very* IMPORTANT to know the clarification.

Pending Home Sales are up for the fifth time in six months. The December reading is now its highest since the federal home buyer tax credit’s April 2010 contract deadline, and the figure is well north of the Pending Home Sales Index 3-year average. That’s obviously a good little nugget of news.

Coupling this data with December’s strong Existing Homes Sales report (+12%) and its strong New Home Sales report (+17%), it’s clear that the housing market has past its trough and is in Recovery Mode. I’m not sure I’m absolutely convinced, but the traders seem to be. That’s what counts.

Even consumer confidence is at an 8-month high.

On a regional basis, December’s Pending Home Sales Index varied as compared against November. The South region led the way, and the West region lagged.

Northeast Region: +1.8%
Midwest Region : +8.0%
South Region : +11.5%
West Region : -13.2%

Competition for Homes Will be Higher this Spring

Home buyers in areas such as Beaverdale would do well to study last month’s Pending Home Sales Index. It offers clues of what to expect during the spring buying season. For example, according to the National Association of REALTORS®, 80 percent of homes under contract close within 60 days.

Therefore, we can look at the December Pending Home Sales Index and project, with a high level of confidence, that home sales will be higher throughout February and March on a units-basis.

Furthermore, because the Existing Home Sales and New Home Sales reports show that housing stock is falling nationwide, spring buyers in Des Moines will notice find more competition for the available housing stock. As the Supply-and-Demand curve shifts towards sellers, home prices will rise.

In other words, there’s no rush to buy a home, but as the year progresses, home prices are expected to rise, as are mortgage rates. This one-two combination will impact home affordability negatively. And the higher that mortgage rates go, the worse the damage. Expect it to happen. It will.

Your home-buying dollar won’t go as far in 2011’s second half as it will go right now. If you have plans to buy a home in 2011, consider moving up your time-frame.

If you’re in the market to purchase a house and need to get pre-approved, give us a shot. We’d be happy to help you out!