The final homebuyer-tax-credit-dependent metric, the National Association of Realtors Pending Home Sales Index (PHSI) for April, showed that the extended tax credit worked nearly as well as the first in boosting sales.
The PHSI, based on sales contracts signed in April and released Wednesday morning, was up 6% to a reading of 110.9, it highest reading since last October's 112.4, which was driven by the expiration of the previous homebuyer tax credit program. The index was 22.9% higher than April, 2009 and followed gains of 7.1% and 8.3% in March and February, respectively. March was revised upward to 104.6 from 102.9. The gain beat analyst expectations of a rise of 5%.
"There were concerns that only a small pool of buyers were left to take advantage of the tax credit extension, but evidently the tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to surging sales," said Lawrence Yun, NAR chief economist."The housing market has to get back on its own feet and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs."
On that count, NAR said expects a net of 1 million additional jobs in the second half of this year and about 2 million in 2011.
Regionally, the Northeast led the gains. The PHSI in the Northeast jumped 29.5% to 97.9 in April, 24.5 percent above a year ago. The Midwest index rose 4.1% to 104.2, 17.9% above April 2009.The PHSI in the South slipped 0.6% to 123.9 but remained 31.3% higher than a year before. The West was up 7.5% to 107.9, 12% higher than April 2009.
"The home buyer tax credit brought close to 1 million additional buyers into the market, which is now helping the trade-up market and has significantly improved the inventory situation," said Yun. "This stabilized home prices more quickly and has preserved about $900 billion in home equity; in turn, that is keeping additional households from going underwater and risking foreclosure."
Still, the Realtors are looking to Congress to allow some wiggle room in the mandate that sales must close by the end of June in order to qualify for the credit. "A big concern surfacing recently is insufficient time to close the deal at the settlement table," Yun explained. "The recent housing cycle has brought long delays related to the short sales approval process by banks, and from ongoing appraisal issues. There could be a sizable number of homebuyers who responded to tax credit incentives, but may encounter problems meeting the settlement deadline by June 30."