Pending home sales rise for 8th straight month

Market still burdened with excess housing stock

-- Home Textiles Today, 11/2/2009 9:00:00 AM

Washington – As first-time buyers race to beat a tax credit expiration at the end of the month, pending home sales in September extended their streak.

The Pending Home Sales Index, a based on contracts signed in September, rose 6.1% to 110.1 from a reading of 103.8 in August. The index stands 21.2% higher than September 2008, when it stood at 90.9. The gain from a year ago is the largest annual increase on record, and the index is at the highest level since December 2006, when it was 112.8, according to the National Association of Realtors.

“Although the tax credit is greatly reviving the existing home market, new-home sales may continue to struggle as home builders hold back production to drive down inventory. In addition, there remains an ongoing credit crunch for construction loans,” said Lawrence Yun, NAR chief economist.

NAR estimates approximately three million renters are now financially well-qualified to buy a median-priced home. However, Yun cautioned, “We’re clearly not out of the woods because an excess of homes remains on the market despite recent improvements. Although current inventory is getting closer to price equilibrium, foreclosures will continue to enter the pipeline. An extended and expanded tax credit would help absorb this incoming inventory.”

The Index experienced its most robust September growth in the West, where it jumped 10.2% to 143.8, or 23.7% higher than September 2008. In the Midwest, the index climbed 8.1% to 98.2, a 17.8% percent improvement over the year-ago period. Pending home sales in the South rose 4.9% to 109.7, up 22.8% over the previous year. The Northeast was the only region to experience a decline in pending home sales – down 2.0% to 83.6 – but that was still 16.9% better than 2008.