The National Association of Realtors ("NAR") maintains a "pending home sales index," which is a forward looking index that tracks contracts signed for home sales. According to a release issued by NAR, this index has risen for the 3rd month in a row. This is likely due to the record low mortgage interest rate and the first time homebuyer tax credit.
The $8,000 first-time buyer tax credit is beginning to impact the market, as first-time buyers must finalize their purchase by November 30th to get the credit. This bodes well for increased activity in the next few months.
However, the risk in putting too much stock in this index is that it is a smaller sample size than the sample taken by NAR for its "existing home sales index." Also, the longer delays in closing on financing these days can lead to more of the sales falling through before they can close. Despite these cautions, the fact that contracts executed on home sales are increasing each month is a positive step.
The total number of existing home sales is expected to improve as well, but with dramatic local market variation in the timing of recovery. States Lawrence Yun, chief economist for NAR, "The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline."
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