Pending Home Sales Rise 10.4% in October says NAR

After a steady stream of depressing housing data, pending homes sales jumped 10.4 percent in October according to the National Association of Realtors.

The Pending Home Sales Index, increased to 89.3 based on contracts signed in October from 80.9 in September. The index remains 20.5 percent below a surge to a cyclical peak of 112.4 in October 2009, which was the highest level since May 2006 when it hit 112.6.

Last October, first-time buyers were motivated to make offers before the initial contract deadline for the tax credit last November. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

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“It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels,” said Lawrence Yun, NAR chief economist.  “The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011.”

“More importantly, a return to more normal loan underwriting standards and removal of unnecessary underwriting fees for very low risk borrowers is needed and could quickly help in the housing and economic recovery,” Yun said. Recent loan performance data from Fannie Mae and Freddie Mac clearly demonstrates very low default rates on recently originated mortgages, much lower that the vintages of 2002 and 2003 before the housing boom.

For the full report, see here.

 

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  • So at this point in the housing and recovery cycle, are we beginning to see vultures, flippers, and bottom feeders (“the big three”) descending on the housing market? Is that the cause for such an increase in pending sales? If so, that could be a very good sign that prices in some sectors of the housing market are beginning to bottom out.

    Flipping has become all but a sanctioned sport in places like Compton, California. The scramble has been so bad there that prices have gone up 10% in twelve months.

    The big three have a tendency to put a lot of offers into a number of home owners with so many contingencies that for all practical purposes they stand little chance of losing even earnest money if they have to back out of some deals.

    It will be interesting to see actual sales from these pending deals over the next two calendar quarters.

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