The National Association of Realtors Pending Home Sales Index, a measure of existing homes that have gone under contract, rose 6.3% in April to 88.2 from a reading of 83.0 in March, a seven-month high and well above the flat month-to-month performance Wall Street was expecting. The index remains 13.1% below its April, 2007 reading of 101.5.
The Realtor group, which released the index Monday morning, was cheered by the news. "Bargain hunters have entered the market en masse, especially in areas that have experienced double-digit price declines, but it's unclear if they are investors or owner-occupants," said Lawrence Yun, NAR chief economist. "Sharp price reductions are leading to a quicker discovery of price equilibrium points. The West is already seeing year-over-year gains in pending contracts."
The West region was up 8.3% to 98.8 in April and is 4.0% higher than April 2007. The Midwest posted the largest gain of the four NAR regions with a 13% gain to 83.7, but it remains 13.1% below April, 2007. The South was up 4.6% to 88.8 but is 22.5% below April 2007. The Northeast was the weakest region with a decline of 1.9% in April to 79.3, also a regional low, and remains 12.2% below a year earlier.
The NAR now forecasts that existing home sales will pick up as the year wears on. Its revised forecast for 2008, which is released each month along with the PHSI, calls for a 15% increase in the pace of existing home sales by the fourth quarter, compared to the second-quarter. Still, the Realtors now see the year ending with a decline in sales of 4.4% to 5.4 million existing homes, compared to 5.65 million in 2007. It expects existing home sales to rise 6.3% to 5.74 million in 2009.
The NAR's forecast for the new-home market is less sunny. It expects new-home sales to fall 31.7% to 529,000 in 2008 from 2007 before rising 12.5% to 595,000 next year. Housing starts, including multifamily units, are projected to drop 27.2% to 987,000 this year, and then slip 0.6% to 980,000 in 2009.
Meantime, the Realtors believe the median new-home price will decline 3.1% to $239,500 in 2008 before rising 5.4% next year to $252,400. "Rising construction costs will provide less room for price cuts on new homes," Yun said.
"Home sales are at about the same level as they were 10 years ago, yet the population has grown by 25 million people and we have over 10 million more jobs," said Yun. "The housing market has been underperforming by historical standards, partly because buyers were hampered by mortgage availability issues, but that's improved and an upturn is more likely. On the other hand, it's unclear what role consumer confidence will play in the coming months."
The Realtors have joined the chorus of organizations, including home builders, who are lobbying Congress to pass a temporary tax credit for home buyers to stimulate the market. A representative of the group last week testified to that effect before the House Committee on Small Business.